Berkshire Hathaway’s 2019 shareholder meeting took place on Saturday, and as usual, Chairman and CEO Warren Buffett and Vice Chairman Charlie Munger spent hours answering investors’ questions.
Here are seven topics Buffett addressed that Berkshire shareholders — and investors at large — will find interesting.
1. Buffett on buybacks
Berkshire repurchased about $1.7 billion worth of shares during the first quarter of 2019 — that’s more than it repurchased in the second half of 2018 after the company’s buyback plan was amended to allow for buybacks whenever Buffett and Munger agree the stock is trading at a discount to intrinsic value.
So, while buybacks certainly took place at an accelerated rate, it’s not quite the multi-billion-dollar buyback many investors wanted to see, especially with the company’s cash hoard continuing to swell. (It’s at $114 billion.)
When asked about the relative lack of buybacks, Buffett defended the company’s somewhat conservative rate. In short, Buffett said that the company’s cash hoard has absolutely nothing to do with buybacks. The company’s available cash “would not make a difference in our approach to repurchase of shares,” Buffett said.
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Which means, expect Buffett to be more aggressive when the company’s stock gets cheaper — period.
Buffett also said that “If our stock gets cheap relative to intrinsic value, we would not hesitate. We would certainly be willing to spend a $100 billion,” reiterating his recent comments that Berkshire could end up buying back massive amounts of stock.
2. Buffett on socialism
Buffett isn’t exactly shy about his political views — he’s a Democrat and was an outspoken Hillary Clinton supporter in the 2016 presidential election. Given the views of some 2020 presidential candidates, it’s not surprising that Buffett was asked about his thoughts on socialism.
While pointing out that his views are his own, and not those of Berkshire Hathaway, Buffett quickly dismissed the notion of pure socialism. “I’m a card-carrying capitalist,” Buffett said. He went on to say that he doesn’t foresee the United States becoming a truly socialist country in the foreseeable future, although Buffett and Munger both emphasized that a country as rich as the U.S. needs to have strong social safety nets.
3. Buffett on Kraft Heinz
Kraft Heinz was Berkshire’s most valuable common stock investment at one point but has performed terribly in recent years. In fact, Kraft Heinz has lost more than 60% of its value since the start of 2017 and recently delayed its first-quarter earnings release due to accounting issues.
Berkshire acquired its 27% stake in Kraft Heinz in 2015 and Buffet recently acknowledged that Berkshire overpaid. “Kraft Heinz is still doing very well operationally,” Buffett said at the shareholder meeting. However, he reiterated one of his best investment lessons by saying that “you can turn any investment into a bad deal by paying too much.”
Later, Munger said that the issues at Kraft Heinz don’t have much to do with product development. “I think the problem was that they paid a little too much for the last acquisition,” Munger said.
4. Is Wayfair’s business model unsustainable?
Berkshire Hathaway has four retail furniture businesses, and Buffett acknowledges that online competitors such as Wayfair have hurt sales — at least in the short term. Wayfair and companies like it have been willing to operate at a loss in order to undercut brick-and-mortar furniture stores.
Buffett isn’t convinced that they have a sustainable model but added that the companies could certainly be successful. However, he still feels that the customer-facing nature of store-based furniture businesses gives Berkshire an advantage, as it allows the company to learn about customer behavior.
5. A word of caution on private equity
Over the past decade or so, private equity funds have surged in popularity, but Buffett and Munger had some words of caution for investors. “We have seen a number of proposals from private-equity funds where the returns are really not calculated in a manner I would regard as honest,” Buffett said. “I would not get excited about so-called alternative investments.”
6. Berkshire after Buffett
Over the past few years, we’ve heard details about Berkshire’s succession plan. At the CEO level, Berkshire has made Ajit Jain and Greg Abel vice chairmen, a move that was confirmed to be part of the succession plan.
At the meeting, Buffett was asked why the two men aren’t on stage with him and Munger. Buffett said that it had been discussed, so it’s not out of the realm of possibilities. And, in a rare occurrence, Buffett did ask Jain to respond to a question about unusual insurance risk.
7. On the stock portfolio
As a final highlight, Buffett shed some light on why Berkshire doesn’t update shareholders more frequently about purchases in the stock portfolio or why Buffett doesn’t explain why he bought stocks more thoroughly.
“We’re not in the business of explaining why we own a stock,” Buffett said. In a separate question about disclosing foreign stock ownership, Buffett succinctly explained why he isn’t more vocal about Berkshire’s stock moves: “We are not about giving business information that is proprietary.”
Matthew Frankel, CFP owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Wayfair. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
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