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Berkshire Hathaway annual general meeting

Managing Director’s insights on Warren Buffet and Charlie Munger:

Andrew Hewison
Managing Director
6 May 2015

On Saturday 2 May, the Hewison Private Wealth partners, advisers and I attended the Berkshire Hathaway annual general meeting (AGM) in Omaha, Nebraska, United States.  

Berkshire Hathaway is the listed investment company of the world’s most successful and wealthy investor, Warren Buffet. Buffet is recognised as the “Oracle of Omaha”, with his investment philosophy based on value investing, a philosophy that we believe in strongly.

Value investing assumes that markets are not always efficiency markets. Therefore, opportunities exist to research and purchase companies that are being undervalued by the market.

Most of Berkshire Hathaway’s holdings are not widely recognised household names including; Clayton Homes, GEICO, See’s Candies and Fruit of the Loom. It does have some household names though including Coca Cola, Wells Fargo and Heinz.

It would be remiss of me not to mention Buffet’s lesser known investment partner and right-hand man, Charlie Munger. Buffet and Munger have together built Berkshire Hathaway from the ground up into the $358b juggernaut it is today.

Berkshire Hathaway’s AGM is like no other. Arguably, there is nowhere else in the world where you will see more than 20,000 people converge into a basketball stadium to hear two elderly men (Buffet 84 years’ old and Munger 91 years’ old) field un-vetted questions from the audience.

Despite their age, both men have incredibly sharp minds, and in Mr Munger’s case, a sharp tongue. We hung on their every word.

Here are our key insights from Warren Buffet and Charlie Munger.

  • Be wary of macro-economic “trends:” When it comes to long term, value investing, Buffet pays little attention to macro-economic trends or conditions. He is the first to admit that he cannot control them, nor can he predict them, so why try? In the words of Munger, “We don’t try to outguess economic conditions. We prefer to keep swimming and let the tide take care of itself.”
  • Buffet unafraid to admit mistakes: Buffet openly admits that he has been wrong about inflation in the United States. He previously believed the United States would have a huge inflation problem by now. However, at present, interest rates have not moved like he thought they would. With that said, he did not make investment decisions at Berkshire on the basis of this macro situation, so it means little to him.
  • When it comes to investments, be mindful of inflation: On the issue of inflation and which companies are inflation proof, Buffet prefers to own investments that only require one capital outlay or contribution, paid at the beginning of the life of the investment. This is when you get the most for your money, as inflation erodes the value of an investment.
  • Control your emotions: “Investing is an easy game if you can control your emotions,” says Buffet.
  • Take care with cash: There is nothing wrong with holding cash. Don’t always be too hasty to spend it. If the opportunity is not there, do not make it up. Berkshire Hathaway currently has US$60b in cash, and the company is happy to wait for suitable investment opportunities.
  • Buy when others are selling: Mr Buffet is well known for many famous statements regarding investing. Throughout the meeting, he reiterated this one in particular, “Be fearful when others are greedy and be greedy when others are fearful.” This essentially means that when others are buying, perhaps you should be selling, and vice-versa.
  • Long-term investing is key: Buffet strongly believes that when you buy a good performing and undervalued company, you must put it in the top draw and not look at it for 10 years. In other words, ignore its’ short term performance and share price.

At 84 years’ young, Warren Buffet has no plans to slow down, or god forbid – retire!

The experience was an inspiring career opportunity for myself, the partners and advisers of Hewison Private Wealth. We have always been long-term, value investors, and following the Berkshire Hathaway AGM, we have even more faith the investment philosophy.

After all, like Berkshire Hathaway, it has stood the test of time.

The information provided above is general information only and individuals should seek specialised advice from a qualified financial adviser. Please contact Hewison Private Wealth for more information. 

Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.