Berkshire Hathaway 2020 Annual Shareholders Meeting

Key Takeaways

  • No matter the challenge, Warren Buffet always bets on America moving forward – “nothing can basically stop America”
    • That said, “be careful about how you bet, simply because markets can do anything”
  • The world has changed for airlines, and it’s unclear when travel demand will return to usual levels
  • Investing in stocks means you are a longterm investor who is prepared to hold for an extended period of time, financially and psychologically
  • “IQ does not always translate into rationality and behavioral success or wisdom” – Warren Buffet

Intro

  • Watch the full shareholders meeting on YouTube
    • Check out the Podcast Notes for the 2019 annual shareholders meeting

Health and Economy Situation

  • “I don’t know anything you don’t know about health matters” – Warren
    • “But in any event, the range of probabilities on health narrowed down somewhat”
  • The same can’t be said on the economic side, the possibilities are extraordinarily wide
    • “We do not know exactly what happens when you voluntarily shut down a substantial portion of your society”
  • No matter the challenge, Warren always bets on America moving forward – “nothing can basically stop America”
    • “We faced great problems in the past. We haven’t faced this exact problem. In fact, we haven’t really faced anything that quite resembles this problem, but we faced tougher problems the American miracle, the American magic has always prevailed, and it will do so again.”
  • That said, “be careful about how you bet, simply because markets can do anything”
    • Be careful with leverage (borrowed money). Berkshire Hathaway never uses leverage to invest.

The World Has Changed For Airlines

  • One obvious change is four companies borrowing an average of $10-$12bn each
    • This debt will have to be paid back, taking away from the airlines’ upside
    • Additionally, it’s unclear when travel demand will return to usual levels
  • Back in December, Berkshire Hathaway sold its entire stake in the four largest US airlines (American, Delta, Southwest, and United Continental)
    • Warren stresses that “we were not disappointed at all in the businesses that were being run and the management, but we did come to a different opinion on it”
    • He added “When we sell something, very often it’s going to be our entire stake. I mean we don’t trim positions.”

Should Investors Buy Stocks?

  • Only if you are a long-term investor prepared to hold for an extended period of time, financially and psychologically
    • Warren: “You’ve got to be prepared when you buy a stock to have it go down 50% or more and be comfortable with it, as long as you’re comfortable with the holding”

Berkshire’s Massive Cash Pile

  • Berkshire has accumulated around $135Bn in cash, Warren explains the motive:
    • “We have not done anything because we don’t see anything that attractive to do. Now, that could change, very quickly or it may not change.”
    • This enables Berkshire to deploy big capital to any attractive investments
  • Berkshire has sent cash to a few of its operating companies to support them
    • That said, companies that are expected to chew up money in the future will not be funded
  • Berkshire doesn’t resort to short term financing, for a simple reason:
    • “We’ll never get ourselves in a position where we have a lot of money that can come due tomorrow”
  • “We don’t need 130 or 35 billion, but we need a lot of money that’s always available. And that means we own nothing but treasury bills.” – Warren Buffet

On Stock Buy-backs

  • “It’s very politically correct to be against buy-backs now” – Warren Buffet
    • He adds “Buy-backs are so simple. I mean it’s a way of distributing cash to shareholders”
  • The decision to buy-back stock should be subject to 2 factors:
    • The money needed for intelligent growth prospects should be retained
    • Companies should buy-back stock when the price is less than the fair value
  • However, some companies used every ounce of their balance sheet to buy-back stocks, which left no cushion for any type of event

Additional Notes

  • Benjamin Graham is one of the three smartest people Warren has ever met
    • Warren: “I’m smart enough not to name the other two”
  • “IQ does not always translate into rationality and behavioral success or wisdom” – Warren Buffet

Berkshire Hathaway Annual Shareholders Meeting : , , ,
Notes By Mostafa Khaled

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