Berkshire Hathaway (BRK.B) - Share Chat

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Some of the key messages from the annual share holder meeting.

The full list of what happened if you want.

Berkshire had a record $137 billion in cash and equivalent at the end of the first quarter, up from about $127 billion at the end of the year. Also, the company spent just $1.8 billion buying stocks and $1.7 billion repurchasing Berkshire Hathaway shares

Seems the best investment was to invest in themselves!

Berkshire reports net loss of $50 billion

Operating earnings increased by $300 million since last year, but this wasn’t enough to offset the losses.

Over the last year, Berkshire has lost 15%, compared to the S&P 500′s 1% loss.

Overall BH outperforms the S&P500, the insurance and travel bets have been stung hard with the pandemic.

“I would like to talk to you about the economic future of the country. Because I remain convinced, as I have – I was convinced of this in World War II, I was convinced of it during the Cuban Missile Crisis, 9/11, the Financial Crisis – that nothing can basically stop America.”

“All you had to do was believe in America. You just had to believe that the American miracle that was intact”

Strong words of encouragement that BH is still very pro the American economy in the long term.

"Anything can happen in terms of markets. And you can bet on America but you’re going to have to be careful about how you bet. Simply because markets can do anything.”

“There’s no reason to use borrowed money to participate in the great American tailwind, but there’s every other reason to do so.”

This was in relation to using margin or gearing your trades. In short, avoid borrowing money to get involved with the markets right now. Long term things will look up but if you borrow your short term is extremely unlikely.

“In my view, for most people, the best thing is to do is owning the S&P 500 index fund”

“There are huge amounts of money people pay for advice they really don’t need.”

This has been a belief that Warren has had for a long time, simply following the markets and keeping your costs down.

“Every one of those people that issued bonds in late March and April ought to send a thank you letter to the Fed because it wouldn’t have happened if they hadn’t operated with really unprecedented speed and determination”

A big thanks to the fed as well. Saying they reacted well and going off what happened in 2008/9 they made a fast and decisive move.

“When we bought airlines, we were getting an attractive amount for our money when investing across the airlines, it turned out I was wrong about that business because of something that was not in any way the fault of four excellent CEOs.”

“I don’t know that 3-4 years from now people will fly as many passenger miles as they did last year … you’ve got too many planes.”

“The world has changed for the airlines. And I don’t know how it’s changed and I hope it corrects itself in a reasonably prompt way”

This is a rarer change of tone when it comes to their long term investment. Generally when looking 10-20 years into the future the short term isn’t as much of a worry. Clearly in this case it is.

The final point about the short term pain where there is an oversupply of airlines and planes compared to the demand of passengers will be a tricky point. What airlines are going to survive and what will they look like?

Asked by CNBC’s Quick to clarify if Berkshire had sold all of its airline holdings, Buffett answered “yes.”

I guess that is the answer to what BH thinks about the airline industry hopes for the future.

“We have not done anything because we haven’t seen anything that attractive,”

“We are not doing anything big obviously. We are willing to do something very big. I mean you could come to me on Monday morning with something that involved $30, or $40 billion or $50 billion. And if we really like what we are seeing, we would do it.”

This is in relation to the massive amount of cash they are sitting on. Even given the turn down in the markets they still don’t see any great companies who are at the valuations they are happy with.

Another side might be the aggressive term sheets that BH can offer. Preference shares, additional dividends etc. Money was easy to come by so no one needed this unfavourable terms, maybe after the pandemic companies will be more eager to deal with BH.

“If you were to sell Berkshire’s various subsidiaries you would incur a very significant amount of tax at the corporate level before anything was distributed to the shareholders”

“There is not a big discount to break up value embodied in Berkshire’s price…It isn’t going to happen.”

“And it not only ensures that the money that’s been made at Berkshire all of it ends up going to various philanthropies staggered over time, but it also — it will keep the wolves away.”

As expected there are no plans to breakup and split the group into smaller parts. The big plus to the large group is the ability to move money around freely and effectively. They see this as one of their biggest value adds’.

“It’s very politically correct to be against buybacks now”

“There’s a lot of crazy things being said about buybacks. Buybacks are so simple. It’s a way of distributing cash to shareholders.”

“It should also be obvious to repurchase shares and there shouldn’t be the slightest taint to it anymore than there is to dividends.”

After BH spent so much buying back their own stock, and them encouraging their portfolio to do the same this comment shouldn’t be a surprise. I feel like this is a little off tone, as the issue with buybacks has been companies using bailouts and government funding to make the buybacks happen. The money used to save a company being funnelled to shareholders is more the issue.

“The price has not been at a level where it really feels way better to us than other things, including the option value of money, to step up in a big way”

When asked why they didn’t buy back even more of their own shares given how much cash on hand they have.

All in all, another very interesting annual meeting. A dark picture is being painting for the airline industry. I expected he would go back and buy them up cheap, but it looks like he is done with the airlines for the new few years.

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Thanks for the write-up. I really enjoy discussing companies like this.

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I saw that, what surprises me is that it is only rising by 1% after the news (Berskhire Class B)

https://app.ft.com/content/ea79c425-2db1-4e73-9023-9256d41a3add?sectionid=markets

https://www.sec.gov/Archives/edgar/data/715957/000119312520187844/d939155dex991.htm#:~:text=“We%20offer%20an%20industry-leading,generation%20and%20storage%20investment%20programs.

From the Dominion CEO:

“We offer an industry-leading clean-energy profile which includes a comprehensive net zero target by 2050 for both carbon and methane emissions as well as one of the nation’s largest zero-carbon electric generation and storage investment programs. Over the next 15 years we plan to invest up to $55 billion in emissions reduction technologies including zero-carbon generation and energy storage, gas distribution line replacement, and renewable natural gas. In addition, between 2018 and 2025 we expect to retire more than four gigawatts of coal- and oil-fired electric generation.

“This narrowing of focus will also allow us to increase our long-term earnings growth rate guidance by around 30 percent. Our rebased dividend policy better reflects our revised operating and financial strengths, aligns with our best-in-class industry peers and allows us to grow our dividend much more rapidly than before.

“This transaction represents another significant step in our evolution as a company, allowing us to focus even more on fulfilling utility customer needs and positioning us for a bright and increasingly sustainable future.”

Warren Buffett, chairman of Berkshire Hathaway, said: “I admire Tom Farrell for his exceptional leadership across the energy industry as well as within Dominion Energy. We are very proud to be adding such a great portfolio of natural gas assets to our already strong energy business.”

I think you’re spot on! I don’t see how the company can avoid returning capital to shareholders if it cannot find better opportunities to invest in. With a decade of under performance of the S&P500 something has to change.

We’re due to see their latest 13F filing shortly. Always interesting to see where these wise old heads are stacking their chips, with or without their brilliant commentary they give us at the AGMs.

My suspicions are that they will have cut into the cash mountain significantly due to inflation fears and also the toe dip we saw into Barrick Gold last quarter is going to have turned into a full belly flop dive into the miners.

No sources whatsoever, just my guess!

Any other guesses?

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QUESTION:

How do companies like Berkshire Hathaway purchase shares? Is this done on regular trading platforms?

Tnx

Mostly I think those deals are done through direct person-to-person negotiation between investment managers and major shareholders, but Investopedia has this article on the mechanics of trading large amounts of shares:

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I’m still hanging in there. Hopefully tomorrow will be a better day.

How do you all feel about the reliance BH has on the sound financial management by Buffett and Munger given their age? 90 & 97 respectively!

This is something I have wondered a lot. Would be good to know as they perform really well. Also, how much actual decision making do they make? Do they have a team of experts who already do a lot? I was assuming it is like some of the huge architect firms named after a single person who can’t possible do the actual donkey work.
Age catches everyone in the end and surely they are well equipped long term.

It must be the case that the donkey work is done for them, but imagine the stock impact when they both retire or worst they suddenly leave this world. I have wanted to buy up some BH.B for some time but this is putting me off and the longer it goes the more put off I am!

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They’re teenagers.

People like Abel and Jain are amongst the crème de la crème.
I’m not worried

New leadership may or may not be more inclined to invest in disruptive tech stocks in order to put the cash vault at work.

I like the prospects, although uncertain

Not investment advice… yada yada… DYOR

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32-bit unsigned integer limit when using 0.0001 as a unit - hitting that limit at some point really should have been anticipated!

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How come 32-bit is still a thing in 2021?

Yes, one would hope that these kind of limits would be anticipated :rofl: