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What we learned from the Berkshire Hathaway annual general meeting

Big oil, Bitcoin and market timing – Lewis Jackson analyses Warren Buffett’s annual letter to shareholders.

Warren Buffett discussed new buys, cryptocurrency and inflation as he took the stage before thousands of the faithful at Berkshire Hathaway’s annual general meeting on Saturday.

Flanked by long-time business partner Charlie Munger, Buffet fielded questions from shareholders and journalists in a five-hour marathon session in Omaha. 

The meeting followed the release of first-quarter regulatory filings for his US$711 billion conglomerate Berkshire Hathaway (BRK.A).

We have collected seven takeaways for those investors unable to travel to the “Woodstock of Capitalism”.

 

Don’t bother timing markets

Buffett doesn’t time the markets and advises you to do the same. He freely admits that he has made “really dumb” investment in the past. 

“I don’t think we’ve ever made a decision where either one of us has either said or been thinking that we should buy or sell based on what the market’s going to do,” he said. 

“Or, for that matter on what the economy’s going to do. We don’t know.”

Acknowledging he “totally missed” the March 2020 Covid crash, Buffett said he often received misplaced credit for the timing of his investing wins.

 

Investing in China

Asked about the dangers of investing in authoritarian regimes, Munger outlined his case for investing in China while acknowledging the political risks remain significant.

“The reason I invested in China is I can get much better companies at much lower prices,” he said. 

“I was willing to take a bit of political risk to get into the better companies at the lower prices.”

Munger said recent comments from President Xi Jinping signalling new government stimulus and a softer stance on the private sector were "hopeful signs".

“Other people might reach the opposite conclusion, and everybody is more worried about China now than they were 50 years ago,” he said. 

 

Markets are a ‘gambling parlour’

Buffett took aim at Wall Street for encouraging a ‘casino-like culture’ among the millions of new investors piled into markets during the pandemic.

"Sometimes the stock market is quite investment-oriented, and other times it's almost totally a casino, a gambling parlor,” he said.

Referencing the growing popularity of options trading among retail investors, he said large US companies had become “poker chips”.

“Wall Street makes money one way or another, catching the crumbs that fall off the table of capitalism,” he said.

Munger blasted online broker Robinhood for its role in the retail trader phenomenon, saying “God is getting just” in reference to the company’s plummeting share price, down 47% this year.

 

Berkshire won’t be buying Bitcoin anytime soon

Buffett isn’t interested in Bitcoin. Contrasting the digital currency to income-producing assets like farmland and apartments, Buffet said he would not take all the bitcoin in the world for US$25.

“Whether it goes up or down in the next year, or five or 10 years, I don’t know,” he said.

“But the one thing I’m pretty sure of is that it doesn’t produce anything. It’s got a magic to it and people have attached magics to lots of things.”

 

Inflation is bad, not so Jerome Powell

The Oracle of Omaha also weighed in on the impact of inflation, its causes and likely path.

Declaring inflation hurts equity investors, Buffett added: “Inflation swindles the bond investor, too. It swindles the person who keeps their cash under their mattress. It swindles almost everybody.”

Acknowledging how massive stimulus from the US Federal Reserve contributed to rising prices, Buffett defended Fed Chairman Jerome Powell for his swift response to the pandemic.

“In my book, Jay Powell is a hero. It’s very simple. He did what he had to do,” Buffett said.

Cautioning against trusting those claiming to predict the future path of inflation, he said: “The question is how much… and the answer is nobody knows.”

 

Buffett spends big on Chevron and Activision

Berkshire Hathaway’s pile of cash shrunk in the first quarter as Buffett and his lieutenants spent a net US$41 on stock purchases only months after lamenting a dearth of bargains.

Chevron (CVX) is now one of the conglomerate’s top four holdings after Berkshire’s stake in the oil and gas giant rose from US$4.5 billion to US$25.9 billion over the quarter.

Buffett also poured billions into an arbitrage bet on Microsoft’s proposed acquisition of US video-gaming giant Activision Blizzard (ATVI). Shares in Activision are trading below Microsoft’s US$95 per share bid as doubts swirl over regulatory approval.

Berkshire piled into the stock in a bet the deal will pass and is now the company’s largest shareholder with a 9.5% stake. Morningstar analysts believe the deal will be approved.

The move caps a busy year for Buffett. Berkshire dropped US$11.6 billion on insurer Alleghany Corp in March, as well as spending billions on shares in Occidental Petroleum and Hewlett Packard.

Buffett said that during the market sell-off this year, a “few stocks got very interesting to us, and we also spent a lot of money”.

 

No sign of retirement (yet)

Fronting shareholders, 91-year-old Buffett joked about his and Munger’s ages but gave no sign he planned to retire.

“If you’re the owner of a company and you’ve got two guys—98 and 91—running the company, you’re entitled to actually see them in person,” he said.

Anointed successor Greg Abel, who runs Berkshire’s non-insurance businesses, joined Buffett and Munger on stage for a portion of the event.

Buffett acknowledged his successor would likely be less free to make deals than he was. He says the Board is more likely to put greater restrictions on his successor or employ greater oversight. 

The oracle is known for nimbleness, reportedly making an offer for Alleghany over dinner.

 

 

 

Lewis Jackson is a reporter and data journalist with Morningstar. Analysis as at 02 May 2022. This information has been provided by Firstlinks, a publication of Morningstar Australasia (ABN: 95 090 665 544, AFSL 240892), for WealthHub Securities Ltd ABN 83 089 718 249 AFSL No. 230704 (WealthHub Securities, we), a Market Participant under the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances.