Berkshire Hathaway (NYSE:BRK) recently held its 2024 shareholder meeting, or if you prefer, Woodstock for capitalists.
If you’ve ever read much Buffett there wasn’t really any new insights in terms of how he thinks about investing. That’s not a bad thing; it’s Berkshire’s consistency of process that’s helped it deliver the long-term returns it has (about 19.8%pa, on average, over 58 years). And it’s always helpful to have these ideas reinforced.
Still, there were a few items of note.
One obvious difference from previous years was the absence of Charlie Munger — the man Buffett credited with the idea of “sitting on your ass”. Not that Charlie ever said much, but when he did it was sharp and to the point. It wasn’t the same without him.
At 93 Buffett himself was as lucid as ever, but it was also good to see Greg Abel (Vice Chairman of Non-insurance and Buffett’s anointed successor) and Ajit Jain (Vice Chairman of Insurance) also on stage to answer questions. Both gentlemen are Berkshire veterans and embody the company’s culture, values and investment philosophy.
One thing that stood out was the immense size of the company’s cash balance — expected to be close to US$200 billion by the end of the current quarter. To put that in context, that’s the size of Kuwait’s GDP.
Berkshire usually has a very healthy cash pile, but it’s now at a level where it represents about a quarter of the company’s market cap. That’s not because Buffett is expecting a crash, necessarily, he just can’t find any compelling use for the money. At least not in a way that would move the dial for the company, and not in a manner that he thinks will outpace the nominal 5% he’s getting in interest — at least in risk adjusted terms.
Indeed, Berkshire sold down some of its stake in Apple (NASDAQ:AAPL) which Buffett hinted was, at least in part, done in an effort to further shore up the cash balance.
Take from that what you will, but it’s perhaps reasonable to surmise he doesn’t think the market, in general, is especially good value right now.
Another interesting take from Buffett was his concern over US fiscal policy, with Uncle Sam currently spending around US$1.7 trillion more than it receives in taxes each year, or roughly 7% of its GDP.
“The focus is on the Fed, but the fiscal deficit should be the focus“, he said. Frankly, the same thing is true here at home.
It wouldn’t be too much of a problem if these deficits were temporary, or if the national debt were manageable, but neither of those things are true. Nevertheless, Buffett isn’t too worried about the US dollar’s status as world reserve currency, or even the debt itself (at least near term), but he did say there was some potential for inflation being “let loose” in a way that could threaten the whole world’s economic situation.
There were, of course, a lot of other topics discussed, and we’d encourage you to watch the full meeting (link below). But one final thing to highlight was what Buffett said about how he’d invest if he was to start over again today.
He suggested that with a <$1 million portfolio, an investor could potentially earn significant returns by dedicating themselves to thoroughly studying small companies and finding mispriced securities.
“I would try to know everything about everything small. You have to be in love with the subject; you can’t be in love with just the money.”
He is, of course, preaching to the choir when it comes to Strawman members.
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