Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 356

Buffett's meeting takeaway: extreme caution

Morningstar's US strategist, Gregg Warren, specialises in researching Warren Buffett's Berkshire Hathaway (BRK). In this two-part article, he provides a brief review of his major highlights from the annual meeting of BRK, followed by a short video summarising Buffett's presentation last weekend.

While wide-moat-rated Berkshire Hathaway's (BRK.A/BRK.B) annual meeting has always been entertaining, it hasn't generally been a big source of meaningful insights into the firm's operations. This year's event, which was a significantly smaller affair with no shareholders in attendance in Omaha and just CEO Warren Buffett and Greg Abel (vice chairman of Berkshire's noninsurance business operations) taking questions from a remotely located Becky Quick (of CNBC), who was collating all of the questions for the three journalists on the journalist panel, was relatively subdued. The meeting not only started later in the day, but Buffett spent much of the first two hours of the five-hour event speaking about his thoughts about the COVID-19 pandemic and its potential economic impacts, touching on everything from monetary and fiscal policy to consumer and commercial behaviour.

The main thing we took away from Buffett's preamble, as well as the question-and-answer segment, was that Berkshire (much as we heard from Charlie Munger in a Wall Street Journal interview in mid-April) is being extremely cautious right now, given all of the uncertainties surrounding the COVID-19 pandemic and subsequent shutdown/recession. Unlike Buffett's famous maxim to "be fearful when others are greedy and greedy when others are fearful", Berkshire actually dumped some stocks, did not pursue any deals, and let its cash balances expand during the first quarter.

While it was no surprise to see Berkshire dump the airlines, we were shocked to see that Buffett stopped buying back Berkshire's shares on March 10 and didn't repurchase any of the company's common stock between then and the end of April. Our general feeling has been that with cash reserves being guarded, distressed opportunities few and far between, and many of Berkshire's stock holdings either struggling with the COVID-19 pandemic or subsequent shutdown/recession, the best option for the company's excess cash may be Berkshire's own common stock.

Greggory Warren, CFA, is a financial services sector strategist for Morningstar. This article is general information and does not consider the circumstances of any investor.

Surprises from Berkshire's Annual Meeting

Click on the image of Gregg Warren to hear his reactions to Buffett's presentation.

 

8 Comments
Jim Simpson
May 14, 2020

Interesting that Berkshire have dumped airline shares.
My memory is that one of Warren Buffet's rules of investing was " never invest in airlines". He backed this up by saying that occasionally, in the middle of the night, he woke up with an idea that he should invest in airlines but he had a 1800 number that he rang and was talked out of it by a counsellor.

Chris
May 07, 2020

Buffett doesn't need to do anything at this stage of his life, he literally will be the person that captures essence of the phrases "he who dies with the most toys, wins" and "When Alexander saw the breadth of his domain, he wept for there were no more worlds to conquer.". There's nothing else to do now, even he has said that when he dies it's all going in an S&P500 index fund.

Not buying anything is probably due to two reasons: (1) at his age, he's probably gone all risk-averse and not wanting to make a mistake right at the end that people will remember him for more than what he did before it and (2) there is nothing to buy at the current prices that is attractive enough.

Sure, there might be something out there but people always want something for even cheaper than is being offered to them, even if it is a good price.

Alfa123
May 09, 2020

Buffett thinks like a businessman first and investor later.

Chris
May 14, 2020

Why are the two concepts separate ?

Alan Moffett
May 21, 2020

A business man cares about health of business on a long term basis ahead of financial rewards. A modern day investor in reality is a speculator who is more interpreted in the price action of security. He is not interested in overall business health, wants to make make quick buck and move on to next security.

This is the main difference between Warren Buffett and an average investor.

david
May 07, 2020

Very surprised with the airline purchase due to the majority of airlines around the world not making profits in the good times. No moat businesses as well.

Thurston Howell, IV.
May 07, 2020

Pretty sure it wasn't Buffett's idea to ever own airlines, rather his upcoming guys Todd and Ted. These worked well, until they didn't. When things went as they did, and future prospects and costs unknown, it was time to bail out, in full, as they don't like minority holdings. As usual, he bares full responsibilty, so you won't hear him blaming his juniors if my theory is right.

CC
May 07, 2020

I was shocked that Buffett ever bought airline stocks in the first place !!
That's something in the past he said he'd never do.

 

Leave a Comment:

     

RELATED ARTICLES

Three key takeaways from Buffett's annual letter

10 quick lessons from Buffett’s 2019 Meeting

Win some, lose some: Buffett's 2020 scorecard

banner

Most viewed in recent weeks

10 little-known pension traps prove the value of advice

Most people entering retirement do not see a financial adviser, mainly due to cost. It's a major problem because there are small mistakes a retiree can make which are expensive and avoidable if a few tips were known.

Check eligibility for the Commonwealth Seniors Health Card

Eligibility for the Commonwealth Seniors Health Card has no asset test and a relatively high income test. It's worth checking eligibility and the benefits of qualifying to save on the cost of medications.

Hamish Douglass on why the movie hasn’t ended yet

The focus is on Magellan for its investment performance and departure of the CEO, but Douglass says the pandemic, inflation, rising rates and Middle East tensions have not played out. Vindication is always long term.

Start the year right with the 2022 Retiree Checklist

This is our annual checklist of what retirees need to be aware of in 2022. It is a long list of 25 items and not everything will apply to your situation. Run your eye over the benefits and entitlements.

At 98-years-old, Charlie Munger still delivers the one-liners

The Warren Buffett/Charlie Munger partnership is the stuff of legends, but even Charlie admits it is coming to an end ("I'm nearly dead"). He is one of the few people in investing prepared to say what he thinks.

Should I pay off the mortgage or top up my superannuation?

Depending on personal circumstances, it may be time to rethink the bias to paying down housing debt over wealth accumulation in super. Do the sums and ask these four questions to plan for your future.

Latest Updates

Investment strategies

Three ways index investing masks extra risk

There are thousands of different indexes, and they are not all diversified and broadly-based. Watch for concentration risk in sectors and companies, and know the underlying assets in case liquidity is needed.

Investment strategies

Will 2022 be the year for quality companies?

It is easy to feel like an investing genius over the last 10 years, with most asset classes making wonderful gains. But if there's a setback, companies like Reece, ARB, Cochlear, REA Group and CSL will recover best.

Shares

2022 outlook: buy a raincoat but don't put it on yet

In the 11th year of a bull market, near the end of the cycle, some type of correction is likely. Underneath is solid, healthy and underpinned by strong earnings growth, but there's less room for mistakes.

Gold

Time to give up on gold?

In 2021, the gold price failed to sustain its strong rise since 2018, although it recovered after early losses. But where does gold sit in a world of inflation, rising rates and a competitor like Bitcoin?

Investment strategies

Global leaders reveal surprises of 2021, challenges for 2022

In a sentence or two, global experts across many fields are asked to summarise the biggest surprise of 2021, and enduring challenges into 2022. It's a short and sweet view of the changes we are all facing.

Shares

2021 was a standout year for stockmarket listings

In 2021, sharemarket gains supported record levels of capital raisings and IPOs in Australia. The range of deals listed here shows the maturity of the local market in providing equity capital.

Economy

Let 'er rip: how high can debt-to-GDP ratios soar?

Governments and investors have been complacent about the build up of debt, but at some level, a ceiling exists. Are we near yet? Trouble is brewing, especially in the eurozone and emerging countries.

Sponsors

Alliances

© 2022 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.