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Berkshire Hathaway: BRK

May 5, 2013

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I am in Omaha, Nebraska and attended the annual general meeting of Berkshire Hathaway yesterday. I have been an investor in BRK for six or seven years. I am most definitely a value investor and follow the principles espoused in Benjamin Graham’s “The Intelligent Investor”.

I dabbled in penny stocks in the 1998 – 2000 period and then bought another junior technology stock in or around 2005 / 2006. None of them provided a return commensurate with the risk.

A number of things struck me at yesterday’s AGM:

(1) Warren Buffett has made this event a profit centre for Berkshire’s businesses. For example, today Warren Buffett will be working in Borsheim’s selling jewelry. He personally sold $1.5 million worth of jewelry last year. This year his target is $2 million. I bought a BRK tie yesterday and the exhibit hall was packed with shareholders spending a lot of money – all at Berkshire owned companies.

(2) His principles don’t change. His messaging yesterday is precisely the same as his messaging ten, twenty or thirty+ years ago. Watch a YouTube video of him from 2001 and you’ll essentially hear what I heard yesterday.

(3) Charlie Munger is the silent giant in that partnership. Seeing the two of them interact on the stage provided real insight into how a functional and complementary partnership can work. These two are incredible individually, but together they are the best. The numbers prove this fact!

(4) The biggest challenge facing BRK going forward is its size. Its operating businesses produce so much cash that the holding company is having trouble finding acquisitions large enough to duplicate its returns of the past. This doesn’t scare me.

(5) Some shareholders are calling for dividends to return capital to us and to release some of the company’s cash hoard. I’m not one of these shareholders. Read pages 20 – 21 of Berkshire’s 2012 annual report (find it on-line) to find out why.

(6) Succession planning is a concern for shareholders. Berkshire’s board has been thinking about this for many years and the plan is in place. While I’m sure there will be some self anointed pundits who will scream loudly about BRK’s demise when our Chairman passes away. I’m confident the company is in great shape and that the succession plan will ensure its continued success.

There are more lessons, but I’m going to head out and absorb some more of Omaha before returning home.

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4 Responses to “Berkshire Hathaway: BRK”

  1. Arlo Sjoberg Says:

    Mark,

    Great email!

    A few years ago, Warren said that Charlie does care when he is going to pass away, he just wants to where he will die. Then, he is going to make damn sure he doesn’t go there.

    Have a great time in Omaha!

    Arlo

    Sent from my iPad

  2. Ly, Sang-Kiet Says:

    Great article – I enjoyed reading it!

    Sent from my iPad


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