Important Takeaways from Berkshire’s 2024 Annual Shareholder Meeting

It is certainly not the same without the late Charlie Munger on stage with Warren Buffett. When asked, “If you had one more day with Charlie, what would you do with him?” Buffett’s response was poignant.

Don’t wait until the last day

He shared, "…calling him was fun back when long distance rates were high and we didn’t talk as often as the years in recent years as we used to be on daily for long periods…What you should probably ask yourself is that 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 them… and meet them as often as you can, because why wait a little last day and don’t bother with the others."

Succession plans for Berkshire

Buffett spoke more openly than ever before about his succession plans at this year’s AGM. The insurance operations would be handled by Ajit Jain, while the broader business decisions would be handled by Greg Abel, so Berkshire can act quickly when opportunities arise, “I would leave the capital allocation to Greg. And he understands businesses extremely well… And I think the chief executive should be somebody that can weigh buying businesses, buying stocks, doing all kinds of things that might come up at a time when nobody else is willing to move.”

Selling down Apple

At 93 years old, Buffett is still making huge moves, except this time he’s selling. He reduced a chunk of Berkshire’s Apple holdings, selling about 115 million shares, or 13% of its stake for approximately $20 billion. He cited building up cash reserves, tax purposes, and maintains a positive view of Apple as one of his core holdings. My post on social media about this sparked quite a debate among investors, starkly dividing Apple shareholders from non-shareholders.

When it comes to Buffett, we have to read between the lines. Berkshire’s cash balance was $189 billion as of March 31, and Buffett projected it to reach $200 billion in the second quarter, suggesting further sales are possible. The rationale for building up cash seems unlikely given Berkshire’s long standing challenge of excess cash without adequate investment opportunities.

Taking a look at Buffett’s other long-term holdings, such as American Express and Coca-Cola, each of which made up over 40% of his portfolio at one point, is instructive. Furthermore, during the 2000 boom, Coca-Cola traded above 60 times its earnings. Amex or Coke were never sold because of valuation, because the company grew too large, or because of tax concerns.

To clarify, trimming the Apple stake is likely a prudent decision, but probably not for the reasons explicitly stated. It is more likely due to Buffett’s assessment of Apple as a business and its merits as an outsized holding in Berkshire’s portfolio.

And here’s my attempt at translating what Buffett is saying, “I like Apple as a business a little less now.”

No opportunities in the market for Berkshire

Buffett also addressed the challenges posed by Berkshire’s massive cash reserves, noting the current lack of attractive investment opportunities. With his characteristic candor, he explained, “I don’t think anybody sitting at this table has any idea of how to use it effectively and therefore we don’t use it… It’s just that things aren’t attractive, and there are certain ways that can change, and we’ll see whether they do.”

It’s worthwhile to note that with Berkshire’s size, Buffett can only hunt for “elephants”, businesses large enough to move the needle in his portfolio. This narrows his investable universe, making the task of finding suitable opportunities even more challenging in the current environment.

Buffett’s concerns with Artificial Intelligence

When Buffett was asked about the impact of Artificial Intelligence on traditional industries, his response reflected a cautious understanding of the technology as a double-edged sword. He expressed his worries, “last year I said that we let a genie out of the bottle when we developed nuclear weapons, and that genie has been doing some terrible things lately. And the power of that genie is what, you know, scares the hell out of me. And then I don’t know any way to get the genie back in the bottle. And AI is somewhat similar…We may wish we’d never seen that genie or it (AI) may do wonderful things, and I’m certainly not the person that can evaluate that.”

Look at stocks as businesses

Buffett reminisced about a pivotal moment in his investment journey, influenced by Benjamin Graham’s The Intelligent Investor. He emphasized a critical perspective that has guided his investment philosophy: “If you look at stocks as a business and treat the market as something that doesn’t tell you, isn’t there to instruct you, but it’s there to serve you, you’ll do a lot better over time than if you try to take charts and listen to people talk about moving averages and look at the pronouncements and all of that sort of thing.”

Advice for investors: Avoid chasing fads

Considering the fluid dynamics of the global market, Buffett emphasized the harsh realities of capitalism, “If you look back, as we did a few meetings ago, as to the top 20 companies in the world at 10-year intervals, you realize the game isn’t quite as easy as it looks. But getting a decent result should be reasonably easy if you just don’t get talked out of doing what has worked in the past, don’t get carried away with fads, and don’t listen to people who have different interests in mind.”

Competition, innovation, and creative destruction continually reshape the business landscape in a brutal way. For many investors, the allure of quick gains, chasing after stock tips, and succumbing to investment fads often results in worse outcomes.

That’s all I have for you today.

Thomas