A Weekend at the Berkshire Hathaway Shareholder Meeting

The annual Berkshire Hathaway Inc. (BRK.A) shareholder meeting is described as the “Woodstock of Capitalism.” After spending the weekend in Omaha, Nebraska, I can attest that the moniker is accurate. In addition to the actual shareholder meeting, there are many other events. This week, I’ll share takeaways from my first time attending it.

Berkshire Hathaway puts on several events for shareholders. A reception and a separate brunch are held in the 62,500 square foot Borsheims jewelry store, where Bill Gates was spotted playing bridge on Sunday. There is a picnic at the 77-acre Nebraska Furniture Mart. A two-day shopping expo at the CHI Health convention center featured many Berkshire-owned companies and more Berkshire-themed items than one person could possibly want. (I would have bought the bowtie if it had featured Warren Buffett and Charlie Munger instead of subtlely displaying the stock’s ticker symbol.) The Invest in Yourself 5K race was held on Sunday. Beyond the official Berkshire events, there were many panels and receptions including Creighton’s Value Investing Panel, the Variant Perspectives conference targeted toward women, the annual Yellow BRKers reception, Markel Corp.’s (MLK) annual brunch and a Nebraska YPOGold panel. It truly is a big event for value investors, but you do have to be a Berkshire Hathaway shareholder to attend the official events, which I am.

As I explained to my wife, who accompanied me, the Berkshire Hathaway shareholder meeting is an outlier. The question and answer session started in the morning, broke for about an hour and then resumed after lunch. The questions varied widely, ranging from making trains more environmentally friendly to share buybacks. Several questions came from kids or from their parents asking on their behalf. My favorite came from a 13-year-old aspiring investor who was seeking advice on how to follow his father’s advice about delaying gratification. Munger responded by saying “You’ll probably find some nice old woman who’s about 95 out there in threadbare clothing and she’s delaying gratification right to the end and probably has 4,000 A-shares. It’s the second- and third-generation types that will buy all of the jewelry.” Buffett observed that holding a 30-year government bond at today’s low interest rates would get a person the same number of rides at a theme park 30 years from now as they could get today. He added, “If you aren’t happy having $50,000 or $100,000, you’re not going to be happy if you have $50 million or $100 million … so, don’t go overboard on delayed gratification.” (As a point of reference, 4,000 class-A Berkshire Hathaway shares were worth more than $1.3 billion on Saturday.)

Another young investor asked Buffett and Munger about their favorite investment. Buffett discussed his one-share investment in Atled Corp., whose name was “delta” spelled backward. It was a duck-hunting club that found out it had oil reserves on its properties when one of its members shot at the ground. Munger said he has turned down about as many as 500 investments for every one he has bought.

Later in the meeting, Munger admitted to missing out on Alphabet Inc. (GOOGL): “We saw how well Google was working in all our offices and we were sucking our thumbs,” explained the vice chairman. Berkshire did recently take a stake in Amazon.com Inc. (AMZN), though neither Buffett nor Munger made the purchase. Buffett countered the idea of value being tied directly to low price-to-book or low price-earnings ratio. Then referencing Aesop’s fable about a bird in the hand being worth more than two in the bush, he quipped, “We worry about what’s in the bush and if somebody will take the bush away.”

The concept of Buffett’s strategy evolving from a strict Benjamin Graham “cigar butt” approach—which called for buying stocks trading at a low price relative to their net current assets—to one incorporating quality factors was only directly brought up briefly during the shareholder meeting. A day prior at the Creighton panel, former hedge fund manager Whitney Tilson explained how his approach changed from a deep-value strategy. He now believes that the key to a successful strategy is a combination of being 75% right on the business model and 25% right on valuation. Previously, he had the mix flipped (predominantly low valuation).

I do want to share a few personal observations. I’ve been to several investor conferences, beyond our own Investor Conference (which is still my favorite—though I am admittedly biased). The Berkshire Hathaway shareholder meeting stands out for its sheer size (the Omaha World-Herald estimated the attendance at 42,000) and its very diverse audience. I had the opportunity to speak with many individual investors—including AAII members—as well as many professionals. There were many attendees who traveled from abroad, too. I personally spoke with shareholders from Argentina, Austria, Australia, China, Great Britain and Mexico. Thanks go out to Robert Johnson, Guy Spier, Vitaliy Katsenelson, as well as both the blue dots (so-named because we put blue stickers on our badges) and The Investors Podcast groups for sharing tips about the weekend’s various events.