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Pointers from Warren Buffett at Berkshire Hathaway’s Annual General Meeting

Berkshire Hathaway Annual General Meeting (AGM) took off in the early hours on 2 May 21. Yahoo Finance covered the 4 hours long meeting and can be accessed by anyone here: https://www.youtube.com/watch?v=gx-OzwHpM9k&t=17299s.

Here are some pointers that I thought are relevant and applicable (so that you do not have to sit through the entire video):

The World Changes in Dramatic Ways

Warren Buffett started off the meeting by sharing two short lessons for new investors not necessarily invested in Berkshire Hathaway, but people who have entered the stock market in the last year or so.

In the past year, there has been a record number of new investors due to the lockdown, commission free trading, stimulus by the government and easy of opening up a brokerage account.

He put up a slide listing the top 20 largest companies in the world by market cap as of 31 Mar 21. Out of the top 6 companies (Apple, Saudi Aramco, Microsoft, Amazon, Alphabet, Facebook) 5 were US companies.

Buffett highlighted that this was not a coincidence and was a result of a system that has worked unbelievably well. He proceeded to questioned the audience to guess how many of these companies will remain on the list 30 years from now?

Buffett pulled out another slide listing the top 20 largest companies in the world by market cap in 1989. More than half of the largest companies were Japanese, only 6 were from the US. However, none of the companies were in the 2021 list.

The most valuable company 30 years ago was valued at just over 100 billion dollars compared to Apple now which is valued at approximately 2 trillion dollars.

Buffett pointed out that investors and bankers were as sure of themselves in the 1980s as they are today yet many of the successful companies then did not manage to hold their positions.

“The world can change in very, very dramatic ways.. Its a great argument for index funds. You just want to be on the ship” – Warren Buffet.

Picking the Next Big Company

Buffet shared that in 1903 when his father was born, automobiles were the exciting industry. Everyone was starting car companies just like everyone is starting something now just to get money from the people.

There were about 2000 companies that entered the automobile business in the 1900s because that was going to be future. However by 2009, there were three left, with two being bankrupt.

“There is a lot more to picking stocks than figuring out what’s going to be a wonderful industry in the future…very, very, very few people picked the winner” – Warren Buffett

Bitcoin

Buffett declined offering his views on the cryptocurrency. However, Munger expressed his strong views on it stating that: “…are just waving the red flag at the bull…”.

He hated the financial success of bitcoin and claimed the whole development is disgusting and contrary to the interest of civilisation.

Trading Apps

Buffet commented that it has become a very significant part of the casino aspect that has joined into the stock market in the last year and a half. These apps dont charge customers anything but they have attracted 12% or 13% of casino participants.

There isnt anything illegal or immoral to gamble on the price of stocks like Apple over the next 7 or 14 days, but Buffett thinks that society wont be built around people doing it.

“I think actually American corporations have turned out to be a wonderful place for people to put their money and save. But they also make terrific gambling chips, and if you cater to those gambling chips when people have money in their pocket for the first time and you tell them take my 30 or 40 or 50 trades a day and you’re not charging commission … I hope we don’t have more of it.” – Warren Buffet

Munger criticism towards Robinhood was much stronger. He called it god awful for decent citizens and that is really waving the red flag to the bull.

Inflation

Buffett commented that we are seeing very substantial inflation, “when we raise prices, people raise prices to us and its being accepted”.

The economy is red hot, people have money in their pockets, demand just keeps going and wont stop. Money is diverted from a piece of the economy (Air travel) into the rest of the economy.

Conclusion

Warren Buffett has always been consistent with his belief in the “American tailwind” and his supportive stance that US companies and capitalism will continue to prosper.

Most investors would benefit from simply picking purchasing an S&P 500 fund index over the long run compared to picking individual stocks.

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