Ten Takeaways from the 2022 Berkshire Hathaway Annual Shareholders Meeting
Ten Takeaways from the 2022 Berkshire Hathaway Annual Shareholders Meeting
"We would die psychologically if we lost a lot of other people's money."
On Saturday morning, Warren Buffett and Charlie Munger took the stage at Omaha’s CHI Health Center Arena to a rapturous standing ovation — an emotional release of gratitude pent up over these three long years without an in-person Berkshire Hathaway annual shareholders meeting.
From 10:15 a.m. to 4:30 p.m. (with a one-hour break for lunch), the pair took questions from all corners on subjects ranging from Berkshire’s recent performance and soaring inflation to Bitcoin and the moral failings of Wall Street.
Neither Buffett nor Munger knew any of the questions in advance or even what topics would be broached, making their quick recalls and substantive answers all the more impressive. And, this year, pretty much every question and answer was punctuated by long rounds of applause from grateful shareholders.
It was not lost on anyone that there will only be so many more of these meetings with both the 98-year-old Munger and 91-year-old Buffett in attendance. Father Time, as they say, remains undefeated.
If you’re not able (or willing) to spend a whole day watching this marathon Q&A, I’m here to help. Check out my top ten takeaways from this year’s Berkshire Hathaway annual shareholders meeting…
Buybacks on Back Burner
After repurchasing more than $50 billion of shares in 2020 and 2021, Berkshire Hathaway slowed the pace of buybacks in early 2022. Buffett spent just $3.2 billion buying back Berkshire stock in Q1, less than half the previous quarter.
And, while buybacks slowed in the first quarter, they seem to have stopped altogether in Q2. Buffett has always said that he will only repurchase shares of Berkshire when doing so is in the best interests of the shareholders. With BRK.A and BRK.B prices rising steadily, it seems the Oracle has hit his buyback limit.
Of course, if the market (and Berkshire) keeps dipping, that could change.
To illustrate the power of effective buybacks, Buffett pointed to American Express. When he stopped buying shares of the credit card processor in 1998, Berkshire owned 11.2% of the company. Now, Berkshire’s stake has ballooned to 20% — with no additional money or purchases.
When companies repurchase shares at the right price, it’s a gift that keeps on giving.
Big Spenders
Berkshire entered 2022 with $147 billion of cash on hand, but now holds just $103 billion after a flurry of activity in late February and early March. Incredibly, the company spent $41 billion between February 21 and March 15 on the acquisition of Alleghany Corp. and big stakes in Occidental Petroleum and HP.
After lamenting the lack of exciting investment opportunities in his annual letter, Buffett leapt into action (“a few stocks got very interesting to us”), which likely also played a big role in Berkshire’s strong price performance during the quarter.
Like I’ve said before, people really LOVE when Buffett spends money.
One thing won’t change: Berkshire will always have a lot of cash on hand. “[Cash] is like oxygen,” said Buffett. “It’s there all the time, but if it disappears for a few minutes — it’s all over.”
Striking Oil
Buffett doubled down on the oil industry during the first quarter, adding 136 million more shares of Chevron in addition to the Occidental Petroleum investment.
Chevron now stands as Berkshire’s fourth-largest holding, valued at $25.9 billion at the end of March. The California-based oil giant, flush with cash due to spiking oil prices, pays a 3.6% dividend and has long been a Buffett favorite.
On the Oxy front, Buffett marveled at how such a large portion of the company (14%) was available for purchase on the open market in just a few short weeks. Just the latest sign that a short-term, gambling mindset prevails on Wall Street these days.
Speaking of which…
The Wall Street Casino
Buffett compared the atmosphere on Wall Street to a gambling parlor, with investors encouraged to make trades and jump in and out of stocks like they were poker chips.
“They make a lot more money when people are gambling than when they’re investing,” he said. “It’s much better to have somebody that’s going to trade twenty times a day and get all excited about it, just like pulling the handle on the slot machine.”
Munger agreed, calling the current market “almost a mania of speculation”.
Working Out
Buffett revealed that Berkshire now owns 9.5% of Activision Blizzard — and may go higher in the near future. Microsoft agreed to purchase the Call of Duty maker for $95 per share earlier this year, but the price of ATVI has rarely risen above $80 since.
This presents Buffett with a classic arbitrage play (formerly known as a “workout”) by purchasing Activision stock in the high $70s and then receiving $95 when the deal closes. As long as nothing scuttles the acquisition, it’s easy money for Berkshire.
I wrote about this potential deal back in January:
Something to consider: ATVI continues to trade well below the agreed-upon $95 purchase price, revealing some lingering concern from market participants that this deal might still fall apart for antitrust reasons. Big Tech is certainly in D.C.’s crosshairs these days, but Microsoft has mostly floated above the fray. Plus, we’re not exactly talking about a gaming monopoly here. Every analyst I’ve seen pays lip service to these antitrust concerns, but expects the deal to go through nonetheless.
Activision stock currently sits at $75.60, though I would expect that to sharply rise on Monday since Buffett has “blessed” this acquisition and believes it will be approved.
OPM
Unlike plenty of others in the investment world, Buffett and Munger agonize over the great responsibility of handling other people’s money. “We have an extreme aversion to incurring any permanent loss with your funds,” Buffett assured his shareholders.
The Berkshire chief even said that, while he could deal with going broke himself, losing money that others entrusted to him would be too much to bear. “We would die psychologically if we lost a lot of other people’s money.”
As such, Buffett repeatedly stressed that Berkshire is built to weather any financial storm — even though he still doesn’t know what the economy or stocks will do tomorrow (or the day after that).
Better With Age
“You ought to be a better person in the second half of your life than the first half,” said Buffett. “That’s not asking too much.”
Years of interacting with a wide variety of people and learning from them should make anyone a better person. It’s also important to figure out what makes you happy — and what makes others happy, too.
Munger added that he doesn’t like to look back at what he did when he was young because it embarrasses him. “Anyone who wishes to quiz Charlie on specifics can do so later,” Buffett quipped.
Bitcoin & Crypto
After demurring on the subject last year, Buffett waded into the deep end on Saturday with a harsh assessment of Bitcoin and cryptocurrency. He said he would much rather own 1% of all the farmland in America for $25 billion than all the Bitcoin in the world for $25.
“That’s the difference between productive assets and something that depends on the next guy paying you more than the last guy,” Buffett said.
And, as expected, Munger minced no words in his disdain for cryptocurrency. “Just say no,” he warned.
Munger said that he typically tries to avoid things that are stupid, evil, and make him look bad — and Bitcoin checks all three boxes. He sees Bitcoin as stupid because it’s very likely to go to zero, evil because it undermines the Federal Reserve and our currency system, and it makes him look bad because China banned crypto and he doesn’t like looking dumber (as an American) than the CCP in China.
Berkshire’s Unique Culture
As always, shareholders fretted over what would happen to Berkshire Hathaway after Buffett and Munger are gone. “If we have the same culture, we’ll be here 100 years from now,” Buffett reassured them. “Berkshire is built forever. There is no finish point.”
He believes that the people are in place — from Greg Abel as successor down through the individual managers of the conglomerate’s many owned companies — for Berkshire’s culture to persist for many years to come.
Quick Hits
“Inflation swindles almost everybody,” Buffett warned. No safe havens in stocks, bonds, or even stuffing cash under the mattress.
Berkshire purchased about $600 million more of Apple stock in Q1 2022.
In a slight change from the past, Buffett believes CEOs and companies should stay out of politics and lobbying. “You can make a whole lot more people sustainably mad than you can make temporarily happy by speaking on any subject.”
Charlie Munger struck an uncharacteristically bearish note on China: “Everyone’s more worried about China now than they were three or four years ago.”
Buffett lavished praise on insurance honcho Ajit Jain, crediting him with “transforming” Berkshire Hathaway. While noting that GEICO is working hard to catch up with rival Progressive Insurance in the telematics game, Buffett said that Jain has added more value to Berkshire than the total worth of Progressive ($63 billion).
Unsurprisingly, a rogue shareholder proposal to prohibit Buffett from serving as both Berkshire’s CEO and chairman was soundly defeated. “It’s the most ridiculous criticism I ever heard,” Munger spat. “It’s like Odysseus would come back from winning the battle of Troy and some guy says, ‘I don’t like the way you were holding your spear!’”
Berkshire brought in eleven tons of See’s Candies for the weekend’s festivities, with boxes of the sweet treats adorning the main table throughout Saturday’s marathon Q&A. At one point, Buffett picked up a box and pointed out the photo of Mary See on the front. “A lot of people think this is me in drag, but that is not true.”
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.