Berkshire Hathaway 2013 shareholder meeting

jamesmith

Came back from the meeting. Listening to Buffett and Munger talk is great joy. The Q&A lasted for over 5 hours, many topics have been discussed. I will try to write down what I remembered tonight.
I encourage all investors or anyone interested in investing/business to attend. The entrance fee is only one share of Berkshire Hathway, which is $110 now.
You can get up to four meeting credentials so you can invite your families and friends.

LLN

源济

期待下文，谢谢分享！

lilitulip

only visit there because of the meeting? or you are a fund manager?

水明善

Nice! Look forward to your meeting minutes.

aimei

Ｐ　越来越像大佬了

chinesebuffet

P哥读书人啊！ 那五只手指仔， 又长又尖又白又斯文！ 不像我们， 肥肥大大粗糙不堪！

jamesmith

Please apologize me delaying the post...after looking at the notes, a lot have been said during the meeting and I am still thinking about some of them.

jamesmith

part 1....

Many topics are covered, many not related to Berkshire. A lot of the questions are the usual stuff and sometimes I can guess how they will answer (you know the way they think after reading them for a while...)

- What is the top five quantitative number to look at when considering a stock?
Look at stock as business. If you are a basketball coach looking for potential players, you won't look at someone that's 5 feet tall. The probability of someone that's 5 feet and a good basketball player is much lower. But that doesn't mean all tall people are good basketball players.
The key is to understand the business, accumulate knowledge of businesses. Brand, some brand transcend better than others. Look for business with some intrinsic characteristics that give it a sustainable moat.
Confidence in what the company will be in 5 years, 10 years. Buy at depressed price. Math is not enough, it won't tell you how a business is run.

- Views on The New Normal, low market return in future.
We don't make decision based on macroeconomics. Don't waste time, focus on the business. Don't ignore what you know with something you don't really know.
Charlie is not optimistic about the next decade, tend to agree with Bill Gross paper about New Normal. The next decade won't be as good as the previous.

- Question on Fruit of Loom, many unbranded lower priced small retailers entering underwear business. Will they be a threat to the business?
Fruit of Loom has the brand. Keep cost low, build brand, network. Although its brand power is not as strong as some companies (use Coke as example). In 5 to 10 years, Fruit of Loom will do reasonably well in the underwear market.

- Book recommendation question
Read all finance books in local library by age 11, including many technical ones, enjoyed them but never formed a philosophy with the ideas. Until he read The Intelligent Investor...Think about stock as businesses. Then Fisher's book expand on the foundation. Owned hundreds of stocks in his career, but only about 10 or so made the big money. Read a lot!

- What do you think about the airline industry. Will you consider buying one to pair with Net Jet (private plane company he own)?
No to the second question.
Airline business has consolidated. Consolidation will benefit the remaining airlines. But sometimes consolidation will hurt, especially when down to two players, gets very competitive (example of Coke and Pepsi). Airline is a very tough business, cash intensive, labor intensive, very high fixed cost. Low incremental cost, that's why consolidation has helped recently, and some airline is starting to get double digit margin. Charlie compares it to rail road business. The barrier to entry is much lower in airline. It's easy to raise money and start an airline. The thought about airline attracts people. However it is impossible to build another railroad in America.
Airline business has been death trap to investors for a long time, they won't be getting in. Both Warren and Charlie: Goes into my too-hard pile.

- Question about repurchase. Will you do more share buybacks?
Share buyback should be related to intrinsic value. Intrinsic value > book value for Berkshire, that's why they are willing to buy back shares up to 120% of book value. However they didn't get a chance to buy back a lot, price went up after the announce it. Charlie made a funny comment about cheapskates :) THey will buy more when the chance comes.

- Short Selling
Warren identified many over priced stocks and some of them are frauds. But making lots of money shorting is not our business...Charlie: we don't want investments with agony.
You may identify fraud company that will go to 0. But it may take a long time and during that period the price can go anywhere. It can be a long and painful wait.

- Stock market is a auction market, crazy things happens. They happen before and will happen again. You won't have this in business negotiation (buying whole company).
Game of life is game of everlasting learning. We won't get to where we are now if we didn't evolve.

- Question related to Benjamin Moore (a Berkshire owned paint brand)
Small overall market share, target the high quality market. Not in retailers (home depots...), uses a different distribution system, if change to retailers will increase revenue but won't do well over time.
Dealer policy works for premium brand, decent profitability. Using retailer distribution will hurt dealers, breaks promises they made when buying the business.

- 99% of the people should buy index fund. Nothing shameful about indexing, overtime will do very well.
Indexing = avoid buying a the wrong time. The main reason people have bad return in market is buying bad business at wrong time. Indexing over time avoid this problem and will do well in the long run.
Charlie: know the limit of your competency.