Reflections On Berkshire's Annual Meeting

Summary

• I attended the annual meeting of Berkshire for the first time.
• The event absolutely blew me away.
• Everyone interested in investing should attend the annual meeting to mingle with other like-minded individuals and to hear the greatest speak.
• Long Berkshire, as I believe the model will endure.

This was the first year I was able to attend Berkshire Hathaway’s (NYSE:BRK.A) (NYSE:BRK.B) annual meeting, and without question, the meeting greatly exceeded my expectations. No one had ever properly articulated just how valuable attending the meeting is, but I will say this now: if you haven’t gone before, you HAVE to go.

I’ll go into greater detail, but attending the meeting was one of the top five best decisions I’ve made in my entire life. There are three main features that make attending a must, including the solid grounding and return to fundamentals that Warren Buffett and Charlie Munger preach, the tremendous energy and fulfillment associated with attending a meeting with thousands of like-minded individuals, and, of course, the intensive Q&A where two of the greatest investors of all time opine on a variety of topics.

Back to Basics

It’s very easy to stray from the basic tenants of investing, particularly when you have a relatively expensive stock market that doesn’t have many bargains after nearly a decade of record low interest rates. However, the visit to Berkshire serves as a real grounding in the core fundamentals that make you a great investor.

First and foremost, Buffett and Munger preach on the importance of patience. This isn’t easy when you see people getting rich on stocks like Telsa (TSLA), Netflix (NFLX), and Amazon (AMZN) or by purchasing cryptocurrencies with parabolic moves. (For the record, no strong opinion on TSLA or NFLX; long AMZN). However, discipline and patience are the best way to long-term wealth. Berkshire continues to sit out of doing large deals as vast amounts of capital sits on the sidelines ready to fuel acquisitions for private equity firms or “strategic” buyers.

It isn’t easy, but you can be assured that Berkshire will be ready to pounce on any meaningful acquisition when the timing is right. Berkshire is currently armed with ~ $120 billion in cash, so the legendary investors will be able to acquire virtually any asset if the price is right.

Building upon the importance of patience, Buffett always preaches about the power of compound interest. Buffett himself has seen the vast majority of gains in his wealth in the later years of his life, and it’s driven by the power of compounding.

Importantly, Buffett also mentioned chapters 8 & 20 of The Intelligent Investor. In short, two of the most important concepts in understanding investing is that you are an owner of a business, and that you should always have a margin of safety when making investing decisions. Not only does Buffett say it, but Berkshire lives it. The annual meeting is a showcase of products and services owned by Berkshire with products designed to cater to Berkshire fanatics (I spent at least $100 on various merchandise). Berkshire isn’t trading stocks; it owns businesses (either outright or fractionally) and they want you to help drive earnings by spending at the general meeting.

I could go on for days, but the other great basic that Berkshire harps upon are the power of individual thought and ignoring what others think. Many investors and corporations treat DCF models like biblical texts that zero in on one all-important value. Munger basically identified this as bogus, and the two investing legends called complicated financial theory “physics envy.” Sometimes simple is better, and it doesn’t really pay for you to sweat theoretical variables like cost of capital and terminal growth rates.

This is my Graceland

Many people have told me that Berkshire is great. No one told me it’s the greatest convention ever held. I imagine I felt the same way that people feel at Star Wars or fantasy conventions. I have two or three friends who I discuss investing with regularly. Berkshire introduced me to literally dozens of different people doing different and great things with their lives. I have never felt more like a family member than I felt at Berkshire.

The energy surrounding the event is just different, as are the people. I conversed with people from all over the world, including Canada, Argentina, Australia China, Japan, and Nigeria. We are all united by our love of Berkshire, and our love of investing. I talked shop about long-term GARP investing, net-nets, growth names, value stocks, real estate, middle market private equity as well as virtually every sector you’ve ever heard of. I have a list of ideas to explore, and potentially some leads on private investments I never would have had a chance to hear about were it not for the event.

Everyone is welcoming, whether it’s Mohnish Pabrai, Guy Spier, or just a person who owns a few shares and lives nearby. Regardless of the level of sophistication, you are able to learn something you never would have known before and learn about industries and companies that would never hit your radar. The people are one of the great aspects of the meeting, and I hope it outlives Buffett, Munger, and even myself.

A Few Legends Talk for Hours

I’ve listened to CNBC interviews, YouTube clips, and I’ve read most of the Berkshire books, but nothing beats hearing it from the horse’s mouth. Listening to two brilliant minds banter with each other and the audience for six hours is limitless entertainment. Sure, some questions are not very good, but the majority allow Munger and Buffett to impart some wisdom upon us all.

Among the highlights from this year was Buffett’s admission that he simply missed Google’s (GOOG) ascension and that he considers Amazon a miracle—so he doesn’t have the same apprehension about missing it. Buffett also explained the ability of Ted and Todd to positively influence portfolio construction by providing insight on technology companies that the Buffett and Munger combination would have missed in the past. I think we will continue to see some of these technology companies creep into the portfolio over time.

Additionally, Charlie Munger is very bullish on China. He thinks US investors need to get over the headlines and really do some research to understand the meteoric rise in China’s influence. Buffett agreed that China would be the other superpower in the world, complementing the US. It’s time for me to start learning about China.

Munger also boldly predicted the rise of single payer healthcare, which he believes will happen when the Democrats control Congress and the presidency. This needs to be incorporated into my investing views on healthcare companies, and it sounds like Munger thinks this could happen in his lifetime (could that be 2021?). The implications will be far-reaching, but the devil will be in the details.

Perhaps most importantly, Buffett and Munger drive home the same platitudes and mental models that have driven the company for the past 53 years and have helped me shape my own life. I’ve heard the sayings dozens of times, but they never get old. Munger typically has a more harsh way of driving home messages than Buffett, but I find that both do it very effectively. If you hear the right messages enough, they just might stick.

Go to the Annual Meeting

My key takeaway here is that you MUST attend the annual meeting. It will not only make you a better investor, but you will have the opportunity to hear from the greatest investing minds of all time (for relatively low costs) and mingle with thousands of smart people who love exactly what you love: investing! The meeting will stick with me long past the duration of the event, and with the reasonably priced flights and Airbnb accommodations, I can safely say the event will have some of the best return on investment of any capital that I’ve ever allocated.

Like all other attendees, I am long Berkshire. I think Buffett and Munger have instilled a culture into the company unlike any other, and I think the firm will continue to deliver solid results for decades to come.

Analyst’s Disclosure: I am/we are long BRK.B, AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.