William Simpson
Warren Buffett’s Berkshire Hathaway gathered for its first annual meeting at an Omaha arena on Saturday, bringing together shareholders for the first time since the death of the longtime vice chairman and right-hand man. Charlie Munger.
Tens of thousands of shareholders packed the arena eager to glean snippets of wisdom from billionaire Buffett, who dubbed the gathering “Woodstock for capitalists” and to pay tribute to Munger, who died at age 99 in November.
The meeting began with a video tribute to Munger recounting his life and highlighting some of his best-known quotes from meetings over the years that drew applause, including classic lines like “If people weren’t wrong so often, we wouldn’t be so rich .” The video also featured old interviews with Buffett and Munger talking about your epic friendship.
The video also featured several classic skits that investors have done for meetings over the years with holiday stars, like a “Desperate Housewives” parody where one of the women introduced Munger as her boyfriend and another video where Jamie Lee Curtis swooned over Munger .
When the video ended, everyone in the arena gave Munger a prolonged standing ovation to thank him for being what Buffett called “the architect of Berkshire Hathaway.”
Rebecca S. Gratz/AP
For decades, Munger has shared the stage with Buffett every year for the marathon Q&A that is the centerpiece of the event. Munger often let Buffett take the lead with expansive answers that lasted several minutes. Then Munger himself would get straight to the point. He is remembered for calling cryptocurrencies stupid, telling people to “marry the best person you want,” and comparing many unproven internet businesses in 2000 to “crap.”
He and Buffett functioned like a classic comedy duo, with Buffett offering long build-ups to Munger’s witty one-liners. Together, they transformed Berkshire from a struggling textile mill into a huge conglomerate made up of a variety of interests, from insurance companies like Geico to BNSF railroads to several major utilities and a variety of other companies.
Munger often summarized Berkshire’s main success as “trying to be consistently not stupid rather than trying to be too smart.” He and Buffett were also known for branching out into businesses they knew well.
“Warren always did at least 80 percent of the conversations. But Charlie was a great foil,” said Stansberry Research analyst Whitney Tilson, who was looking forward to her 27th consecutive meeting with a heavy heart over Munger’s absence.
This absence, however, could create space for shareholders to get to know better the two executives who directly supervise Berkshire companies: Ajit Jain, who manages the insurance units, and Greg Abel, who manages everything else. Abel will one day replace 93-year-old Buffett as CEO. Abel and Jain share the main stage with Buffett for the first time this year, in the place Munger occupied.
The first time Buffett asked Abel a question, he mistakenly said “Charlie?” out of habit.
Morningstar analyst Greggory Warren said he expects Abel to talk more this year and allow shareholders to see some of the brilliance Berkshire executives talk about. Since Munger let slip at the annual meeting three years ago that Abel would be the successor, Buffett has repeatedly assured investors that he is confident in the choice.
Berkshire Hathaway Remains Successful Amid Declining Profits
Buffett’s company reported a sharp drop in profits as the nominal value of its investments fell and it sold part of its huge stake in Apple, but overall, many Berkshire Hathaway businesses performed well.
Berkshire reported a profit of $12.7 billion, or $8,825 per Class A share, for the quarter. That’s about a third of the $35.5 billion, or $24,377 per A share, Berkshire disclosed a year ago.
But those numbers were heavily influenced by a big drop in the value of Berkshire’s investments. That’s why Buffett encourages investors to pay more attention to the conglomerate’s operating profits to the exclusion of investment numbers. By that measure, Berkshire’s operating profits jumped 39% to $11.222 billion from last year’s $8.065 billion as its insurance companies led a strong performance.
The three analysts surveyed by FactSet Research forecast operating profit of $6,701.87 per Class A share.
Buffett sold nearly $6 billion worth of shares during the quarter, including cutting about 13% of Berkshire’s massive stake in Apple. The investment in the iPhone maker is still the largest in the $364 billion portfolio at $135.4 billion, and Buffett said he expects Apple to remain the biggest investment for years to come — even until his successor takes over.
But the estimated value of Berkshire’s Apple stake suggests Buffett sold more than 100 million shares. Buffett said he invested in Apple stock because of consumers’ devotion to the iPhone and other Apple products.
Apple CEO Tim Cook, who is at the Berkshire meeting, told CNBC that he still considers it a privilege to have Berkshire as a majority shareholder, and he knew about the sales before Berkshire disclosed them on Saturday.
Berkshire reported underwriting profit of $2.6 billion at its insurers, up from $911 million a year ago.
BNSF railroad’s profits disappointed and fell 8% to $1.143 billion, but most of its many other companies posted solid results, including a 72% jump in operating profits at its utilities unit, which added $717 million. to Berkshire’s total.
Berkshire’s revenue grew 5% to $89.87 billion in the quarter. The two analysts who reported estimates to FactSet predicted revenue of $87.044 billion.
With no major acquisitions in sight, Berkshire’s massive cash pile continued to grow to a record $188.993 billion in the quarter. Berkshire spent as much as $2.6 billion on share repurchases during the first three months of the year, but its companies, including insurer Geico, railroad BNSF, several large utilities and an assortment of dozens of others continue to generate mountains of money.
“We’d love to spend it, but we won’t spend it unless we do something with very little risk and will make us a lot of money,” Buffett said.
