Warren Buffett addressed investors throughout the world at Berkshire Hathaway's 2022 Annual Shareholder Meeting on Saturday, and returns to Omaha in person for the first time since before the pandemic began.
In an hours-long event, the investing legend fielded questions on Berkshire's business and investment decisions, and his views on the economy.At the Berkshire meeting, Buffett stated that inflation swindles almost everyone, and Munger railed against bitcoin and the market mania.
Here were some of the highlights from the event.
Buffett's Berkshire Hathaway reported a decline in first-quarter earnings on Saturday due to the stock market turmoil and weaker insurance results.The company reported $7.04 billion in revenues,up 0.3 percent year-over-year. The company reported $5.46 billion in earnings, down from $11.71 billion in the year-earlier period for a decline of about 53%. Earnings per share for the first quarter were $3,702, down sharply from $7,638 a year ago, compared with analysis expectations of $4,490.Warren Buffett previously stated that the company's earnings tend to fluctuate from quarter to quarter because it holds a large number of assets.Thus, long-term investors should pay more attention to the company's operating earnings.Berkshire’s operating earnings was $7.04 billion.
Earnings from Berkshire’s manufacturing, service and retailing segment jumped 15.5% to $3.03 billion in the quarter, railroad and utilities earnings increased slightly. Earnings from insurance underwriting business dropped nearly 94% to $47 million from $764 million in the year-earlier period.
“The amount of investment gains (losses) in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in Saturday’s release.
Berkshire also announced its latest top four holdings, which represent 66% of its portfolio. $Apple(AAPL)$ remained Berkshire Hathaway's largest holding at the end of March, valued at more than $159.1 billion. Followed by $Bank of America(BAC)$ ($42.6 billion), $American Express(AXP)$ ($28.4 billion), and $Chevron(CVX)$ ($25.9 billion).
Berkshire bought more than $51 billion of stocks during Q1′s market turmoil
During the market turmoil of the first quarter, Berkshire purchased more than $51 billion worth of stocks, including large investments in Chevron, HP, and Occidental.Berkshire 's Chevron investment was worth $25.9 billion at the end of March. The stake, which was first purchased in the third quarter of 2020, increased its position by about one-third during the fourth quarter 2021. Due to an increase in oil prices, Chevron's shares rose more than 30% this year.Chevron was not Buffett's only favorite energy stock. Buffett also purchased 136.4 million shares of Occidental Petroleum, worth over $7.2 billion, last month.
The Russian invasion of Ukraine is deepening concerns about energy prices. Even before the invasion, gasoline prices in the United States had risen sharply since last February. In addition, The energy sector yields 4.7%, compared to S&P 500′s 1.5% dividend yield. Chevron pays a 3.6% dividend.Buffet explained that the short-term volatility resulting from a "gambling mentality" enabled him to identify good long-term investment opportunities.
“That’s not investment. You’re not buying from investors. I find it just incredible. You couldn’t do that with Berkshire. ... Overwhelmingly, large companies in America, they became poker chips,” Buffett said.
“That enabled us, in a two-week period, to buy 14% of a business that’s been around for decades,” Buffett said. “Imagine trying to buy 14% of the farms in this country. 14% of the apartment houses. 14% of the auto dealerships, or just anything, when 40% were locked up some other place. It defies anything Charlie and I have seen, and we’ve seen a lot.”
The best protection against inflation is investing in your own skills
Inflation is the hottest topic this year. The annual inflation rate in the US accelerated to 8.5% in March of 2022, the highest since December of 1981 from 7.9% in February and compared with market forecasts of 8.4%.
Core consumer prices in the United States rose 6.5 percent year-on-year in March of 2022, accelerating from a 6.4 percent increase in February.Buffett talked about the massive stimulus during the pandemic as a key reason for the rising prices now.“You print loads of money, and money is going to be worth less,” Buffett said“Inflation swindles the bond investor, too. It swindles the person who keeps their cash under their mattress. It swindles almost everybody,” he said.Bufett pointed out that inflation also increases the amount of capital that companies need and that maintaining inflation-adjusted profits is not as simple as raising prices.
Buffett reiterated that the best protection against inflation is investing in your own skills. Hyperinflation sees a rapid and continuing increase in nominal prices, the nominal cost of goods, and in the supply of currency. You do not have to worry about hyperinflation if you do what you are good at and become useful to society.
Cash Is King, Berkshire is ‘better than the banks’
Buffett reiterated that they believe in holding lots of cash. And here he distinguished Treasury bills from commercial paper. The former is cash, the latter is not.Although Berkshire invested $51 billion in the first quarter, it still holds over $100 billion in cash and cash equivalents. Warren Buffett has stated in a letter to shareholders that Berkshire will always hold more than $30 billion in cash. he reinforced his belief in cash’s value Saturday, even in a high-inflation environment.Buffett played a significant role during the Great Recession, providing capital during a pivotal moment to companies such as Bank of America and Goldman Sachs.Today, he noted that Berkshire Hathaway would always be cash-rich, and in times of need, would be “better than the banks” at extending credit lines to companies in need.
“We want Berkshire Hathaway to be there and in a position to operate if the economy stops. Some of our companies have bank lines – I don’t know why they have the bank lines. We’re better than the banks. We’ll give them the money if they need it.” Buffett said.
They are Still no Fans of Bitcoin
“When you have your own retirement account, and your friendly adviser suggests you put all the money in into bitcoin, just say no,” he said.
Bitcoin has become increasingly attractive to certain investors who are using bitcoins and other cryptocurrencies as a hedge against inflation. Fidelity Investments intends to allow investors to put a bitcoin account into their 401(k)s.But Buffett and Munger have still criticized crypto and bitcoins.Buffet stated that he cannot calculate the value of bitcoin because it does not produce anything,
“Whether it goes up or down in the next year, or 5 or 10 years, I don’t know. But the one thing I’m pretty sure of is that it doesn’t produce anything,” Buffett said of cryptocurrency, “It’s got a magic to it and people have attached magics to lots of things.”
Buffet explained farmland, apartment buildings — and even art — as assets that had more tangible value than bitcoin.
“If you said… for a 1% interest in all the farmland in the United States, pay our group $25 billion, I’ll write you a check this afternoon,” Buffett said. ”[For] $25 billion I now own 1% of the farmland. [If] you offer me 1% of all the apartment houses in the country and you want another $25 billion, I’ll write you a check, it’s very simple. Now if you told me you own all of the bitcoin in the world and you offered it to me for $25 I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything. The apartments are going to produce rent and the farms are going to produce food.”
Munger said bitcoins are stupid and evil.
“In my life, I try to avoid things that are stupid and evil and make me look bad ... and “In my life, I try and avoid things that are stupid and evil and make me look bad in comparison to somebody else – and bitcoin does all three,” Munger said. “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 China. It was smart enough to ban bitcoin in China.”
Buffett said, displaying an image of an old $20 bill. “The United States government affects that this became exchangeable for lawful money in the United States,”While it loses significantly in purchasing power during a financial crisis, when we need to pay our bills, we use that instead of bitcoin. There is no reason for the U.S. government to allow another currency to replace US dollars.
Buffett says he has never been ‘good at timing’Buffet has stated many times that he cannot predict the future. He cannot predict future earnings or market performance. He is also unable to predict economic conditions.Buffet stated that he had also missed some opportunities. He failed to make several large purchases in the early days of the pandemic. In March 2020, the Dow Jones Industrial Average dropped 12.9% in a single day, its worst day since 1987.
“We have not been good at timing,” Buffett said. “We’ve been reasonably good at figuring out when we were getting enough for our money. And we had no idea when we bought anything, but we always hoped it would the down for a while so we could buy more. ... I mean, that stuff, you could you could learn in fourth grade.”
Instead, Buffett follows a value investing strategy, which involves picking companies with attractive valuations instead of investing based on the whims of the stock market.Warren Buffett purchased Apple in the first quarter of 2016. Apple's stock price was about $100 at the time, and after he bought it, it dropped to $90. Warren Buffett continued to purchase Apple in the following years.
In mid-2018, the conglomerate acquired 5% ownership of the iPhone manufacturer, a stake valued at $36 billion, and it is now worth $160 billion.Other than Apple’s giant appreciation in share price, it also pays regular dividends, averaging about $775 million annually.
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