Warren Buffett and Charlie Munger have once again completed their annual Berkshire Hathaway shareholder’s meeting, and they still have the stamina to sit before an audience for five hours. If you don’t want to watch the whole thing, what can we learn from them? Here are five points that struck me.
I’ve already covered Warren Buffett’s ambitions for investing in the UK and Europe regardless of Brexit, but there’s one key figure that emphasises the influence he could possibly wield.
In March 2019, the value of Berkshire Hathaway’s cash and short-term investments stood at $114.2bn (£87.8bn). Mr Buffett has enough cash, at current market valuations, to buy up the entirety of Diageo (£77bn), AstraZeneca (£76bn) or Reckitt Benckiser (£43bn).
In fact, there are only four FTSE 100 companies with higher valuations than Mr Buffett’s spare cash — Royal Dutch Shell, BP, Unilever and HSBC Holdings.
Kraft Heinz has fallen 50% from its 52-week high, knocking $10.6bn off Berkshire ‘s investment. Mr Buffett insists that the current management of the struggling food company is improving things, and he has no intention of walking away.
But there’s been a $15bn write-down on some of its brands, and there’s an ongoing investigation into its accounting by the US Securities and Exchange Commission.
The lesson? As Mr Buffett says himself, he simply paid too much for it. No matter how good a company, there’s always a price that’s too high.
I’d never think of either of these gentleman as such, but a “horse’s ass” is precisely what Charlie Munger says he feels like when he reflects on Berkshire’s failure to invest in Google’s parent, Alphabet.
He and Warren Buffett described it as one of their biggest regrets, saying they were “sucking their thumbs” when they should have been buying.
But hindsight bites the best of us, and I think not buying something that goes on to greatness is one of the least damaging mistakes we can make.
What you know
Stick to what you know, says Warren Buffett. So what about Elon Musk’s plan for Tesla to start selling insurance to buyers of its electric cars?
He’s not the least bit concerned, saying: “The success of the auto companies getting into the insurance business is probably as likely as the success of the insurance companies getting into the auto business.“
Could he be wrong? If Tesla’s intention is not to make money from insurance but to make a compelling offering that would tempt more people into buying its cars, there could be more to it than meets the eye.
Berkshire Hathaway shares have been lagging the market, and it’s led to Mr Buffett suggesting that it might soon be time to use up some of that cash mountain to repurchase shares.
But why are the shares underperforming? I suspect part of the answer lies in Berkshire’s recent purchase of Amazon stock, at a sky-high P/E. The decision was made by one of the next generation of Berkshire’s managers, and to many it doesn’t look like a Buffett-style investment at all.
The truth is that mortality gets us all, and (probably like many) I just can’t see how Berkshire Hathaway can be the same without Warren Buffett and Charlie Munger.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Berkshire Hathaway (B shares), Tesla, and Unilever. The Motley Fool UK has recommended AstraZeneca, Diageo, and HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.