Around 40,000 people descended upon Omaha, Neb. last week to hear from Warren Buffett. Saturday marked the 50th annual Berkshire Hathaway (NYSE: BRK-B) shareholder meeting since Buffett took over the firm.
As a value investor and Berkshire Hathaway shareholder, I keep close tabs on Buffett. During a five-hour Q-and-A session, Buffett and partner Charlie Munger responded to questions from reporters and shareholders.
Here is a top 10 list of highlights from the Berkshire Hathaway annual meeting, and Buffett’s subsequent interview on CNBC.
- Prepared for the Worst: Berkshire is prepared to weather any storm that comes. With $63.7 billion of cash on its balance sheet, Buffett said, “We will be very willing to act if economic turbulence of any kind occurs, and will be prepared, and most people won’t be.” The last stock market crash spelled a big opportunity for Berkshire, allowing the company to buy up a huge stake in Wells Fargo (NYSE: WFC) on the cheap. The company’s $11.8 billion investment is now worth $26.5 billion.
- Who Will Lead Berkshire After Buffett? The Oracle of Omaha has been tight-lipped about what’s next for Berkshire when he steps down. Buffett wants a new Berkshire CEO with operational experience. “I would not want to put someone in charge of Berkshire with only investing experience and not any operational experience,” he said. The next CEO of Berkshire will be a candidate from within the company – someone who knows the unique Berkshire culture.
- Private Equity Backlash: Berkshire has been criticized for investing in Kraft Heinz alongside private equity firm 3G Capital. Critics argue that Buffett is outsourcing to 3G the dirty work of laying off employees and cutting costs. He defended the partnership, saying, “The 3G people have been successful in building marvelous businesses … I don’t know of any company that has a policy that says we’re going to have a lot more people than they need.”
- Predatory Lending Practices: The Seattle Times recently criticized Berkshire’s Clayton Homes for its lending practices. Clayton is the largest homebuilder in the country focused on mobile homes. Buffett responded to the accusations, saying, “I make no apologies whatsoever for Clayton’s lending terms.”
- Coca-Cola and IBM Stocks Lag: Over the last five years, shares of Coca-Cola (NYSE: KO) and International Business Machines (NYSE: IBM) have lagged the S&P 500. Buffett defended both long-term holdings, and said he bought more shares of IBM this year. He also praised share buyback programs as a way to boost shareholder value and earnings.
- Buying in Europe: Earlier this year, Berkshire bought out a German motorcycle apparel and accessories retailer for $452 million. The acquisition is small for Berkshire, but indicates Buffett’s interest to invest in Europe. At the time of the acquisition, Buffett said that he’d love to buy big businesses in Europe. The reason? “Prices may be a little more attractive there than in the United States,” Buffett said.
- Burlington Northern Turnaround: In this year’s shareholder letter, Buffett highlighted operational challenges at Berkshire’s Burlington Northern Santa Fe railroad. Those problems resulted in the company losing market share to competitor Union Pacific. At the annual meeting, Buffett praised the BNSF turnaround, saying, “The improvement has been huge, and I want to thank (BNSF executives) Matt Rose and Carl Ice for their really extraordinary performance.”
- Stocks Are Cheap … If Interest Rates Remain Low: Buffett thinks stocks are highly valued, if interest rates were at a “normal level.” He told CNBC on Monday, “If these interest rates were to continue for 10 years, stocks would be extremely cheap now.” The flip side of this is that stocks are expensive, if the Fed raises interest rates.
- Short-Sell Bonds: Stocks may be expensive on a historical basis. But compared with bonds, Buffett thinks they are cheap. “If I had an easy way, and a non-risk way, of shorting a lot of 20-year or 30-year bonds, I would do it. But that’s not my game. It can’t be done in the quantity that would make sense for us,” he said.
- Drink Soda, Enjoy Life: A devout Coca-Cola shareholder, Buffett claims one-quarter of the calories he consumes are from Coke. Now 84 years old, Buffett claims that the sugar has made him happy and helped him live a long life. On healthy foods, Buffett said, “If I had eaten broccoli and brussel sprouts, I don’t think I would have lived so long.”
Berkshire Hathaway remains one of my top personal holdings. The stock provides a great amount of diversification to a wide range of businesses and sectors.
I recommend Berkshire stock as an alternative to a blue chip mutual fund or ETF. Plus, by owning Berkshire you can have the talented Warren Buffett managing some of your capital.
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