Woodstock for Capitalists, Twitter, and Peter Cundill

Apr 29, 2022

This weekend, tens of thousands of Berkshire Hathaway shareholders will descend on Omaha, Nebraska, for a three-day bash otherwise known as the company’s annual meeting. At most businesses, annual meetings are dreary affairs that draw few guests and even less interest from the wider world.

With Berkshire, though, it’s a very different story…

Welcome to “Woodstock for Capitalists”

Each year, the headliner is the same: a Saturday morning/afternoon Q&A session with Warren Buffett and Charlie Munger (as well as insurance savant Ajit Jain and Buffett’s successor-in-waiting Greg Abel) where they field questions on just about every topic under the sun for hours on end.

This year, CNBC will stream the entire meeting — along with a pre-show, halftime, and post-show (all anchored by Buffett whisperer Becky Quick) — on its website.

All year long, fans anxiously await these precious hours of unfiltered thoughts and opinions from two of the greatest investors of all time. Buffett and Munger pull back the curtain a bit on their investing philosophy, macroeconomic outlook, and even general life advice.

But, for those diehards who make the trek to Omaha, the “Warren and Charlie Show” is only part of the fun.

Berkshire will turn the CHI Health Center Arena into a shopping mall of sorts, full of companies owned (either partially or fully) by the conglomerate. You can sip on a Coca-Cola, munch on See’s Candies, or dig into a Dairy Queen blizzard. Or try on a new pair of Brooks running shoes. Or tour a private plane owned by NetJets. Or…

You get the idea.

For one weekend, Berkshire brings its entire stable of companies under one roof with special discounts and offers available only to shareholders. It’s a pretty sweet deal. And more than lives up to its nickname as “Woodstock for Capitalists”.

Back to Normal

The atmosphere at this year’s event should be even more celebratory than usual. After all, it’s the first in-person Berkshire Hathaway annual meeting since 2019. Way back in The Before Times.

In 2020, during the early stages of the Covid-19 pandemic, Warren Buffett and Greg Abel sat in an empty arena and delivered a presentation and virtual Q&A that was equal parts uplifting and depressing. Buffett kicked off his speech with a pep talk of sorts about how the United States of America always overcomes adversity and should never be counted out.

Answering questions, though, Buffett expressed uncertainty and reticence about how the pandemic would affect the market. He was peppered with virtual questions about why he didn’t make any investments when the market bottomed out in March — and disappointed others by revealing that Berkshire dumped all of its airline stocks.

All in all, not one of the happier Berkshire meetings.

2021 was, thankfully, a lot better. The meeting temporarily shifted venues to Los Angeles, which allowed Munger to rejoin his longtime partner at the main table. Probably the most notable highlight came when Munger slipped up and inadvertently confirmed Abel as Buffett’s successor. That had previously been a closely-guarded secret.

And, now, everyone’s ready to get back to normal. “[The 2022 meeting] is going to be an enormous celebration,” Whitney Tilson of Empire Financial Research told Barron’s. “It’s not just about Buffett and Munger. It’s like a religious revival. Fellow pilgrims are making the pilgrimage.”

Berkshire Hathaway 📈 vs. S&P 500 📉

Another cause for celebration is that, after a few subpar years that lagged the red-hot S&P 500, Berkshire Hathaway is back on top of its game. And, if they were lesser men (like me), Warren Buffett and Charlie Munger would probably spend the weekend spiking the football right in the faces of their media critics and doubters.

Alas, they’re two pretty classy gents.

At Thursday’s close, here’s how Berkshire matches up to the S&P 500 benchmark (YTD):

Berkshire Hathaway: Up 9.8%
S&P 500: Down 10.6%

Not even close. And that includes a slight pullback from Berkshire over the past few weeks. Both the A and B shares were up close to 20% year to date in late March.

Christopher Bloomstran @ChrisBloomstran

Great to be back in Omaha! A little trivia for the weekend: Berkshire Hathaway can decline 99.3% and still have outperformed the S&P 500 since 1965. I mentioned that to Mr. Buffett several years ago. His reply, “Ben Graham would be proud. But let’s not test the math.”

Other Items on the Agenda

Warren Buffett is spending money again — and that’s got both Wall Street and Berkshire Hathaway shareholders excited.

As such, there will be lots to talk about at Saturday’s Q&A. Including the effects of rampant inflation and rising interest rates, whether or not Berkshire is still buying back shares as the price steadily increases, and Buffett’s recent flurry of activity.

The Oracle won’t have much to say about the Alleghany acquisition or his new stakes in HP and Occidental Petroleum — Buffett never discusses deals in progress or stocks that he may or may not still be buying — but everyone will be parsing his words and reading tea leaves nonetheless.

It should be a very interesting weekend in Omaha.

The Rational Walk @rationalwalk

As Charlie Munger joked years ago, many Berkshire annual meeting questions really boil down to: ”How do I get as rich as you guys, but faster, a lot faster!”

🐦 Elon Musk Calls Twitter’s Bluff

I’m not sure if you’ve heard, but Twitter officially accepted Elon Musk’s $44 billion offer to purchase the social media platform and take it private.

While this news caused quite a stir in some circles, I don’t think Twitter’s board of directors had any other choice. They couldn’t afford to turn down Elon’s offer.

Obviously, they didn’t want to take the deal — but that pesky fiduciary duty owed to shareholders likely forced their hand.

If Twitter’s board rejected the offer and the company’s share price didn’t rise over $54.20 shortly thereafter (12-18 months at the most), lawsuits from disaffected shareholders would rain from the heavens.

And, ultimately, Elon held the trump card. If Twitter rebuffed his offer, he likely would have sold his 9% stake, sending the share price spiraling back down to the low-to-mid $30s. All but ensuring those aforementioned lawsuits.

The Late, Great Peter Cundill 🇨🇦

I’ve been studying the life and career of Canadian value investor Peter Cundill for a future article — stay tuned — and, man, he was quite a character.

(1) Cundill’s biography is titled “Routines and Orgies”

(2) He possessed Buffett-like eating habits: “If you choose to eat fat-free yogurt, make sure you complement this with plenty of hot dogs, hamburgers, and french fries.” No word on Cherry Coke, though.

Kingswell