5 key takeaways from Berkshire Hathaway's Annual Meeting

Berkshire Hathaway’s annual meeting was held on Saturday, 6 May – It was a packed house, with Chairman Warren Buffett and Vice Chairman Charlie Munger answering questions from shareholders for over five hours.

The investing GOATs talked about everything from the recent banking crisis to how much they love Apple. In this wire, I’ll try my best to unpack the annual meeting in five key points.

#1 Get used to making less

“The majority of our businesses will report lower earnings this year than last year,” said Buffett, noting that the “incredible period” for the US economy is coming to an end.

Munger was a lot more pessimistic, saying “I think value investors are going to have a harder time now that there are so many of them competing for a diminished set of opportunities ... So my advice to value investors is to get used to making less.”

#2 Buffett is an Apple fan

Apple accounted for nearly 40% of Berkshire’s portfolio as of 31 December 2022.

“It just happens to be a better business than any we own … I made a mistake a couple of years ago when I sold some shares when I had certain reasons why gains were useful to take that or from a tax standpoint,” he said.

“It has a position with consumers where they’re paying, maybe they pay 1,500 bucks or whatever it may be for a phone. And these same people pay $35,000 to have a second car. And if they had to give up a second car or give up their iPhone, they’d give up their second car.”

On Friday, Apple shares rallied 4.0% after reporting better-than-expected first quarter earnings, driven by higher iPhone sales and subscriber income. 

#3 … And also an oil fan

Berkshire holds approximately 210 million Occidental Petroleum shares worth US$12.8 billion – That’s almost a quarter of outstanding Occidental stock or 3.8% of Berkshire’s portfolio (7th largest holding).

Of that position – Approximately 194 million shares were purchased in 2022 and a further 16 million shares so far this year.

“There’s speculation about us buying control, we’re not going to buy control … We will not be making any offer for control of Occidental, but we love the shares we have,” said Buffett.

“We may or may not own more in the future but we certainly have warrants on what we got on the original deal on a very substantial amount of stock around $59 a share, and warrants last a long time, and I’m glad we have them.”

#4 The Banking Crisis

In anticipation of a few questions about banks, Buffett bought out some props from underneath the table.

“The situation in banking is very similar to what it’s always been in banking – the fear is contagious, always,” said Buffett.

“[First Republic] were offering non-government guaranteed mortgages in jumbo amounts at fixed rates, sometimes for 10 years before they change the loading. And that's a crazy proposition"

“It was doing it in plain sight and the world ignored it ‘til it blew up.”

“You don’t know what has happened to the stickiness of deposits at all … And that changes everything. So we’re very cautious in a situation like that,” he said.

"We do remain with one bank holding … I like Bank of America, I liked the management, and I proposed the deal for them. So I stick with it."

#5 The US dollar, cash is ‘king’ and Japan

A few miscellaneous comments that I found interesting:  

• On the US dollar: “We are the reserve currency. I see no other option for any other currency to be the reserve currency,” however, “it’s easy for America to do a lot, but if we do too much, it’s very hard to see how you recover once you let the genie out of the bottle and people lose faith in the currency.”

• On cash: "Anyone who thinks cash is trash ought to look at the Federal Reserve balance sheet. It is just astounding the way $100 bills have spread. … Believe me, cash is not trash.”

• On Japan: "Berkshire is the largest borrower, corporate borrower, outside of Japan, that exists. We didn't set out to be that. But it's turned out that way, and we're not done in terms of what may come along there. And we have some direct operations there, as I mentioned. And we have some really wonderful partners working for us.”

#6 Bonus point: Buffett the Comedian

“When I woke up this morning, I realised that we had a competitive broadcast going out somewhere in the UK. And they were celebrating King Charles. And we’ve got our own King Charles here today,” said Buffett, referring to closest partner and right-hand man – Charlie Munger.

This article was first published for Market Index on Monday, 8 May 2023.