Warren Buffett and Charlie Munger are two of the most well-known and respected figures in the world of business and investing. Together, they have built Berkshire Hathaway into one of the largest and most successful companies in the world, with a market capitalization of over $600 billion. Warren Buffett, often referred to as the "Oracle of Omaha," is the chairman and CEO of Berkshire Hathaway. He is widely regarded as one of the most successful investors of all time, having achieved a compounded annual return of 19.8% from 1965 to 2022, compared to the S&P 500's compounded annual return of 9.9% over the same period.
For those doing the math, $100 invested in Berkshire Hathaway in 1965, are now worth roughly $2.42 million compared to $22,400 for the S&P 500.
During the first week of May, I attended the Berkshire Hathaway annual general meeting (AGM) in Omaha, Nebraska. It was remarkable to see Warren Buffett (92) and Charlie Munger (99) answer questions for 8 hours ranging from investing, business, and life. While there are always some new nuggets of information, most of my time there was a reminder of Buffett and Munger's core principles:
Think long-term: Successful investing and business requires a long-term mindset and a willingness to be patient and stay the course through market fluctuations and short-term volatility.
Stay within your circle of competence: Focus on businesses that one understands well and have a competitive advantage in analyzing.
Invest in quality companies: Look for businesses with sustainable competitive advantages, such as a strong brand, proprietary technology, or network effects, which can help them to generate long-term profits and grow over time.
Be patient and disciplined: Stick to a well-thought-out investment strategy and avoid impulsive decisions based on short-term market fluctuations or emotional reactions.
Focus on value, not price: Look for businesses that are undervalued relative to their long-term potential and hold them for the long term until their true value is recognized by the market.
Continuously learn and improve: Continuous learning and improvement are essential to long-term success, both in investing and in life in general.
Maintain integrity and ethical behavior: They believe that treating others with respect and acting with honesty and transparency are essential to building long-term trust and success.
Overall, the Berkshire Hathaway AGM is a unique event that offers investors a chance to learn, network, and celebrate with like-minded individuals who share their passion for investing and business.
While the Berkshire AGM is one event, I try my best to observe Warren throughout the year and decipher his many actions. We know that, last year, he was a net buyer of stocks but most of what he bought was commodity stocks. With their ownership of Occidental Petroleum and Chevron, Berkshire now has a large position in the oil and gas sector. In addition, Warren has invested in Japanese trading companies, also called Shoshas, that have significant investments in commodities - both base metals and soft commodities.
We interpret this to mean that Warren believes that hard assets are likely to fare better in this market environment. These businesses have tailwinds from underinvestment in supply, disciplined capital allocation and increasing demand. Importantly, these commodities are priced in US dollar and benefit when the dollar is depreciating. Over the years, Warren has expressed concern at the US running twin deficits and, this year, seemed despondent on the US political discourse which he said is moving from 'partisan to tribal'. The commodity sector can be volatile, but, if the 1970's is any indication, investors can expect outsized returns from their investments.
That is my humble conclusion from Warren's capital allocation decisions over the last year.
In closing, I would encourage each and everyone one of you to visit Omaha in 2024 for Berkshire Hathaway's AGM. Hope to see you there!