Notable Takeaways from Berkshire Hathaway's Annual Meeting

Apple hasn’t been good, it’s been a great business!

As stated by Warren Buffet himself, Apple is ‘better business’ than any of its fully-owned subsidiaries. Since acquiring an equity position in the company in 2016, Berkshire Hathaway has benefited from the phenomenal growth that has occurred over time.

Regarding its Apple ownership, Mr. Buffet makes a salient point about the firm’s product resonance with consumers, and how investors ultimately benefit from this relationship:

"Apple is in a position with consumers, where they're paying maybe $1,500, or whatever it may be, for a phone," Buffett said. "And the same people pay $35,000 for having a second car, and [when] they have to give up a second car or give up their iPhone, they'd give up their second car. I mean, it's an extraordinary product. We don't have anything like that that we own 100% of, but we're very, very, very happy to have 5.6%, or whatever it may be, and we're delighted every 10th of a percent that goes up."

The message behind this is a strong one – you don’t need to own 100% of a business to benefit from it; starting a small position and building on it over time will prove beneficial in the long run. It’s even better when the company in question is one of the most valuable companies globally.

The Value Investing Outlook

Both Buffet and Munger’s belief in value investing has been well documented over the decades, however, their respective outlook for the future of the investment approach is somewhat different at this point in time. 

Charlie Munger stated the following on value investing:

“I think value investors are going to have a harder time now that there are so many of them competing for a diminished set of opportunities,” Munger said. “My advice to value investors is to get used to making less.”

Conversely, Warren Buffet’s opinion was somewhat different: 

“What gives you opportunities is other people doing dumb things,” he said. “...And there’s been a great increase in people doing dumb things.”

The current market environment is filled with uncertainty, as alluded to by Mr. Munger, but new opportunities may always become available due to the actions of others or unforeseen market events. The most recent example of this is JP Morgan Chase & Co, the largest bank in the U.S., acquiring First Republic Bank, a top-15 bank, due to the current weakness in the banking system. Under normal conditions, this transaction would not have been allowed by regulators, but exceptional circumstances required an abnormal response.

The lesson here to investors is that great opportunities become available at the most unexpected times and in the most unexpected ways.  As such, one needs to be prepared to evaluate and capitalize on them as they become available.    

Thoughts on AI

With Artificial Intelligence being a top-of-mind topic for individuals and investors at this juncture, gauging the viewpoint of these gentlemen on its potential development was interesting.

Always straight to the point, Mr. Munger plainly stated ‘Old-fashioned intelligence works pretty well’ – clearly indicating his skepticism of the technological advancement.

Mr. Buffet appears more cautionary in his outlook, acknowledging there is potential for unintended consequences. He is quoted as saying:

"Einstein said," of the atom bomb, "this will change everything in the world except how men think and I say the same thing...with AI it can change everything in the world, except how men think and behave. That's a big step to take."

While there is no immediate investment takeaway from their respective statements, their viewpoints indicate where their sentiment towards the prevailing fervor around AI leans – it is a tool, an exceptional one, but not transformative yet in its ability to change the thoughts and behaviors of individuals.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision