On Saturday, Berkshire Hathaway concluded its first in-person annual meeting since 2019 as the pandemic forced the company to conduct its last two annual meetings online. Warren Buffett and his long-time partner and friend, Charlie Munger, spoke for hours, answering shareholders' queries and commenting on wide-ranging topics ranging from their views on the current macro-environment to their skepticism of bitcoin.
The duo also discussed its performance and revealed Berkshire's significant investments during the first quarter while adding their characteristic folksy anecdotes on investing and life. In today's article, I summarize some of the key takeaways from the meeting.
Source: Warren Buffett and Charlie Munger at press conference during the Berkshire Hathaway Shareholders Meeting in Omaha, Nebraska, April 30, 2022. CNBC
Berkshire now owns a 9.5% stake in Activision Blizzard
Buffet revealed that Berkshire now holds a 9.5% stake in Activision Blizzard, worth about $5.6 billion based on the current market cap. Berkshire's initial investment in the company goes back to Q1 of 2021 when the company purchased $1 billion worth of Activision Blizzard stock. Earlier this year, in January, Microsoft announced intentions to buy Activision for $95 per share, providing a boost to the share price as it surged from $65 to $82 in a matter of days after the announcement. However, the share price closed at $75.60 on Friday, still 20% below Microsoft's proposed takeover price.
Buffett stated that Berkshire "had no prior knowledge" of Microsoft's plan to buy the company when Berkshire made its initial investment. Buffet further commented that he now sees an arbitrage opportunity by announcing Microsoft's intention to buy at $95/share. Berkshire's chairman and CEO highlighted the following:
Occasionally, I'll see anarbitrage dealand do it, occasionally, it looks like the odds are in our favor...If the deal goes through, we make some money, and if the deal doesn't go through, who knows what happens.
Stock Purchases of $51 billion during the first quarter
Soon after lamenting the lack of attractive investment opportunities in a letter to shareholders earlier this February, Berkshire went on a spending spree buying more than $40 billion worth of stocks over the next three weeks, as follows:
- Increasing its exposure to the energy sector, Berkshire increased its stake in the oil giant Chevron to $26 billion, up from $4.5 billion at the beginning of the year to make it one of the four biggest investments of the company.
- Berkshire also invested $7 billion in Occidental Petroleum in March and has the option to increase the stake even further through stock warrants. After accounting for the Occidental warrants, Berkshire now has around $40 billion exposure toward energy.
- The company also acquired the insurer Alleghany at $11.6 billion during the quarter.
Commenting on the Investments, Buffett explained that Occidental's capital-return plans and higher oil prices in the wake of Russia's invasion of Ukraine made the stock a buy and that Alleghany was a natural fit for Berkshire's insurance operations.
On the subject of Berkshire's new investments during the first quarter, Charlie Munger quipped the following:
We found some things we prefer to owning Treasury bills,
Source: Warren Buffett and Becky Quick at the Berkshire Hathaway Annual Shareholder Meeting in Omaha, Nebraska, April 29, 2022.David A. Grogan | CNBC
Munger slams Robinhood and warns against the Wall Street Casino 🎰
Robinhood's stock has been cascading since the IPO and is now down 70% since its IPO. Munger, in his comments, slammed the platform and referred to the company's payment for order flow business as "hidden kickbacks."
🗣Munger said:
Look what happened to Robinhood from its peak to its trough. Wasn't it pretty obvious that something like that was going to happen?
It was disgusting. Now it's unraveling. God is getting just.
Buffett, who is often more diplomatic in his comments, also reserved some criticism for the market makers on Wall Street. For example, they seem to encourage gambling behavior among investors to generate more profit.
Wall Street makes money catching the crumbs that fall off the table of capitalism.
They make a lot more money when people are gambling than when they're investing.
Source: Charles Munger and Warren Buffet face in Berkshire Hathaway T-Shirts at the Berkshire Hathaway Annual Shareholders Meeting in Omaha, Nebraska. David A. Grogan | CNBC
Bitcoin is likely to go to zero📉 😨
Buffet reinstated his disliking of bitcoin, stating that he wouldn't be tempted to buy it at extremely low prices since it produces nothing of value. Munger went a step further in his critique of the cryptocurrency and said,
In my life, I try to avoid things that are stupid and evil and make me look bad … and bitcoin does all three.
In the first place, it's stupid because it's still likely to go to zero,
It's evil because it undermines the Federal Reserve System … and third, it makes us look foolish compared to the Communist leader in China. He was smart enough to ban bitcoin in China.
Buffet appreciative of Fed Chairman Jerome Powell for stimulus support after COVID-19
Unlike Munger, Buffett was appreciative of the actions of Fed chairman Jerome Powell after the outbreak of COVID-19 in 2020, noting that:
We had a situation unlike any other situation in our history, in my book, Jay Powell is a hero. It's very simple. He did what he had to do.
Inflation Swindles Almost Everybody💰
In March, inflation surged in the United States, hitting a new 40-year annualized high of 6.6%. In reply to a question on decades-high inflation numbers, Buffet said:
Inflation swindles the bond investor, too. Itswindles the person who keeps their cash under their mattress. It swindles almost everybody.
The CEO of Berkshire further stated that he believes that the best defense against inflation is to be skilled at what you do and produce a good or service that will remain in demand, which people will be willing to pay for.
Source: An old 20 dollar bill shown during Berkshire Hathaway press conferenceCNBC
Concluding Thoughts
For decades, Buffet and Munger have shared their words of wisdom, and they have provided investors through their shareholder letters and annual meetings with invaluable lessons and knowledge. As a Buffet-Munger fan, it was a pleasure watching these old heroes, full of energy and passion, deliver the 2022 annual meeting, which remains one of the most fascinating investing and business events globally, attracting millions of eyeballs every year.
Author: Yiannis Zourmpanos
Twitter: yiannisz
📈Investment Research: Seeking Alpha
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