Every year, the city of Omaha in the US welcomes thousands of shareholders to Berkshire Hathaway’s Annual Meeting. Before the formal proceedings, Warren Buffett and Charlie Munger take questions from the audience for six or seven hours. These meetings have provided valuable advice for investors and this year was no exception. Here are 10 lessons from this year’s edition:
1. Price paid determines the investment outcome (Warren Buffett)
“You can turn any investment into a bad deal by paying too much. What you can’t do is turn any investment into a good deal by paying little, which is sort of how I started out in this world.”
2. No magic formulas in investing (Warren Buffett)
“We have no formulas around Berkshire. We don’t sit down and have … people work till midnight calculating things and putting spreadsheets together.”
3. If it’s a great company, you should be happy to see lower prices (Warren Buffett)
“What hurts is that [Apple] stock has gone up … we’d much rather have the stock at a lower price so we could buy more.”
4. On investing in Amazon and Google (Charlie Munger)
"I give myself a pass (for not investing in Amazon). But I feel like a horse's ass for not identifying Google earlier ... We saw it used in our own operations and we just sat there sucking our thumbs."
5. Bitcoin is like roulette (Warren Buffett)
“Imagine people going to stick money on some roulette number … they just do it. Bitcoin has rejuvenated that feeling in me.”
6. Invest in technology only if you understand it (Warren Buffett)
“It is true that in the tech world, if you can build a moat, it can be incredibly valuable. I’ve not felt the confidence that I was the best one to judge that in many cases.”
7. The meaning of value investing (Warren Buffett)
“You’re putting out some money now to get more later on. And you’re making a calculation as to the probabilities of getting that money and when you’ll get it and what interest rates will be in between.”
8. It is possible to be overdiversified (Charlie Munger)
“I have always been willing to own [a concentrated portfolio of] stocks. And I have not minded that everybody who teaches finance in law school and business school teaches that what I’m doing is wrong.”
9. Government bonds may not be the best investment right now (Warren Buffett)
“The low interest rates, for people who invest in fixed-dollar investments, mean that you really aren’t going to eat steak later on if you eat hamburgers now.”
10. Beware of following the herd (Warren Buffett)
“We won’t go into something because somebody else tells us it’s a good thing to do. We are not going to subcontract your money to somebody else’s judgment.”
Wilbur Li holds a Bachelor of Commerce (Honours in Finance) from the University of Melbourne. He has worked at Unisuper (global equities) and Yarra Capital Management (equities and fixed income). This article is general information and does not consider the circumstances of any investor.