Value Investor Daily #19

9 Key Highlights From Berkshire's 2024 Annual Meeting

Berkshire Hathaway recently held its 2024 Annual Meeting, which has become much more than a standard shareholder gathering.

Over the years, it has transformed into an iconic occasion where tens of thousands of investors meet, not just for company updates, but also for the unique opportunity to see and hear the legendary investor Warren Buffett in person.

Charlie Munger was sorely missed this year for the first time in decades. Buffett paid Munger an emotional tribute in response to a question from the session, which reflected the tone of the entire event.

Charlie liked learning, he liked wide variety of things, so he was much broader than I was, but I didn't have any great desire to be as broad as he was, and he didn't have any great desire to be as as narrow.

But we had a lot of fun doing anything—we played golf together, we played tennis together, we we did everything together.

And this you may find kind of interesting, we we had as much fun perhaps even more, to some extent, with things that failed. Because then we really had to work work and work our way out of them, and in a sense there's more there's more fun having having somebody that's your partner in digging your way out of a foxhole, than there is just sitting there and watching an idea that you got 10 years ago just continually produce more and more profit.

You know he really he really fooled me though, he went to to 99.9 years. He publicly said he never did a day of exercise except where it was required when he was in the Army, he never did a day of voluntary exercise he never thought about what he ate.

Charlie was interested in more things than I was, but we never had any doubts about the other person—period.

So if I'd had another day with them we'd probably done the same thing we were doing the earlier days, but we wouldn't have wanted to know that we only had one day.

It's an interesting question. What you should probably ask yourself is who do you feel that you'd want to start spending the last day of your life with, and then figure out a way to start meeting him or tomorrow, and meet them as often as you can, why wait a little last day—and don't bother with the others.

-Warren Buffett on his friendship with Charlie Munger

Here are 9 other key highlights from the meeting:

1. Apple Stake Reduction: In Q1, Berkshire Hathaway significantly decreased its stake in Apple (NASDAQ: AAPL) by 13%, a decision that might suggest a broader caution toward the U.S. stock market.

However, Buffett clarified that tax considerations drove the reduction. According to the latest quarterly filing, the value of Berkshire's investment in Apple dropped to $135.4 billion from $174.3 billion at the end of the previous quarter.

Despite this reduction, Apple remains Berkshire's largest equity holding, and Buffett expressed confidence that it would likely remain so by the end of the year.

2. Portfolio Update: Berkshire continued to be a net seller of equities, with Q1 seeing $17 billion in net stock sales. Approximately 75% of its equity investments are concentrated in five major companies, with Apple leading, followed by Bank of America (NYSE: BAC), American Express (NYSE: AXP), Coca-Cola (NYSE: KO), and Chevron (NYSE: CVX).

3. Record Cash Holdings: Berkshire Hathaway’s cash reserves surged to an impressive $189 billion, signaling potential preparations for navigating future market fluctuations or capitalizing on buying opportunities during dips.

This significant accumulation reflects a cautious approach to the market. But the Oracle of Omaha emphasized the company's strategic spending discipline, stating, "We'd love to spend it [cash], but we won't spend it unless we think they're doing something that has very little risk and can make us a lot of money."

4. Succession Plans: At 93, Buffett discussed succession, affirming Greg Abel as his choice for overseeing future stock investment decisions, highlighting Abel’s deep understanding of business and investment.

5. Artificial Intelligence: Buffett expressed caution about the potential misuse of artificial intelligence.

He highlighted the technology's role in enabling scams, equating it to letting “a genie out of a bottle." Buffett specifically pointed to AI technologies like voice-cloning, facial-cloning, and deep-fake technology, which scammers exploit to create fraudulent videos for extortion.

He recounted an  incident involving a realistic fake video of himself, noting, "It was me, and it was my voice and wearing the kind of clothes I'm wearing, and my wife or my daughter wouldn't have been able to detect any difference, and it was delivering a message that no way came from me."

He also drew a parallel between the historical impact of nuclear weapons and AI, suggesting both have been like releasing a powerful force from containment.

Buffett acknowledged AI’s positive aspects despite his caution, admitting that “Obviously AI has potential for good things too.”

6. Insurance Performance: The insurance business, particularly GEICO, performed strongly, with pretax underwriting earnings rising to $1.93 billion from $703 million in Q1/23.

This was driven by higher premiums, lower claim frequencies, and operational efficiencies despite rising claim severities.

7. Energy: Vice Chairman Greg Abel noted that Berkshire's energy business is currently grappling with litigation related to the 2020 wildfires in Oregon, which could expose its PacifiCorp unit to billions in potential liabilities. He acknowledged that the sector would face ongoing challenges.

Buffett expressed a commitment to renewable energy, though he remarked that such a transition would require time. He also stated that, while important, solar energy is unlikely to become the sole source of electricity.

8. Paramount Global Loss: Ted and Todd had nothing to do with Berkshire’s Paramount position.

Buffett took full responsibility for the investment in Paramount Global, which resulted in a financial loss, stating, "It was 100% my decision, and we sold it all, and we lost quite a bit of money.”

Even the greatest investor of all time makes mistakes. It’s not about being perfect. It’s about learning from every mistake.

He said it made him reflect on what people choose to do with their leisure time and the governing principles of entertainment businesses, from sports to movies.

9. Musk’s response: Following Berkshire's stake reduction in Apple, Tesla CEO Elon Musk publicly encouraged Buffett to consider investing in Tesla. "He should take a position in Tesla. It's an obvious move," posted Musk on X (formerly Twitter).

You can watch the entire event here. It’s nearly 5 hours, but well worth it.

Finally, be sure to read Whitney Tilson’s latest valuation of Berkshire’s stock. He thinks it’s modestly undervalued by 7% now.

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