Warren Buffett defended Berkshire Hathaway Inc.’s investments last year, saving his toughest comments for some of the hottest investment vehicles at the company’s annual meeting.
Mr. Buffett, chairman and chief executive officer of Berkshire, and his business partner Charlie Munger spoke on stage from Los Angeles and asked questions for about four hours. The two men said that some acquisition firms, day traders, and private equity funds that drove valuations to record levels in both private and public companies were more gamblers than investors.
“I have nothing against the poor fish that play,” said Mr Munger on Saturday. “I don’t like the pros who take the suction cups.”
“It’s a moral failure. It’s not just stupid, it’s shameful, ”he said of SPACs.
Berkshire has been hurt by the rise of some of these investors as they made it difficult for Berkshire Hathaway to use its nearly $ 150 billion on a large acquisition. Mr Buffett said these groups invest with other people’s money and have a time limit to put in cash, which drives prices up.
“To be honest, we are not competitive with it. It won’t go on forever, “Mr. Buffett said of SPACs.
Looking at Berkshire’s performance, Mr. Buffett defended Omaha, Neb., Conglomerate’s investment record last year.
When the pandemic broke out a year ago, Mr Buffett sold all of his holdings in major airlines. He also cut his stakes in several banking firms and didn’t make large acquisitions, even though markets declined sharply. Since then, the aviation industry has been one of the largest to recover, and the broader market has grown.
Shareholders have questioned whether Mr. Buffett has been active enough in what may be opportunistic times.
“I don’t think it’s a great moment in Berkshire history, but we have more fortunes than any other company on earth,” he said.
“And I still don’t want to own the airline business.”
Mr Buffett said the decision to restrict airlines reflects a broader belief about the future of the industry, particularly about the likely impact of business travel.
He said his move was to sell part of the apple to the company Inc.
Inventories were “probably a mistake” and Mr Munger told him it was a mistake. Still, Apple remains Berkshire’s largest single-stock investment.
Mr Buffett touched on several other questions on Saturday including the decision to hold the meeting in Los Angeles and commented on the company’s quarterly results.
Although he criticized day traders, he gave advice to those who first traded stocks last year. He said that a hundred years ago it was clear that cars would be the future. Since then, more than 2,000 automotive companies have perished.
“There’s a lot more to be done in choosing stocks than figuring out what will be a wonderful industry in the future,” said Buffett.
He criticized Robinhood Markets Inc. and other trading apps that have grown in popularity over the past year, saying they exploited people with higher disposable incomes.
They “take advantage of society’s gambling instincts, and it’s not admirable,” Buffett said.
“It creates its own reality for a while and no one tells you when the clock will strike twelve and it’s all about pumpkins and mice,” Buffett said of the waves of retail investors.
“There’s an old guard who doesn’t want the average American to have a seat at the Wall Street table to resort to insults,” said a Robinhood spokeswoman. “The new generation of investors is not a ‘casino group’. You are breaking down old barriers to investment and taking control of your financial future. Robinhood is on the right side of the story. ”
As 90-year-old Mr. Buffett and his 97-year-old business partner, Mr. Munger, age, succession has become a more important issue for shareholders. Some investors have asked to hear more from Mr. Buffett’s potential successors and Vice Chairs, Ajit Jain and Greg Abel, who respectively oversee the insurance business and the company’s operations.
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Both men joined Messrs Buffett and Munger in Los Angeles.
Berkshire operates a large insurance operation as well as railroad operations, utilities, industrial manufacturers, retailers, and car dealerships. It also holds great investments, especially in the stock market. Because of the diversity of Berkshire’s operations, Mr. Buffett is in a unique position to discuss both the economy and the markets.
Mr. Buffett built his sprawling conglomerate as a vehicle for investors interested in long-term profits. As such, Berkshire runs a variety of different businesses that Mr. Buffett believes will stand the test of time. The company also invests the float from the premiums its insurance customers pay.
The setting for Saturday’s meeting contrasts with Berkshire’s virtual get-together last year when the US was in the early stages of the Covid-19 pandemic. With millions of Americans unemployed, Mr. Buffett spent much of the 2020 meeting emphasizing the ability of the economy to recover from adversity.
A year later, Mr. Buffett speaks as the U.S. economy has largely improved and 30% of Americans are fully vaccinated against the coronavirus. The conglomerate started the day with strong gains for the first quarter thanks to insurance and stock market gains.
Several shareholder questions centered on the major tax reforms proposed by President Biden last month, some of which would increase taxes on inheritance and corporations.
Mr Buffett said the tax hikes for Berkshire wouldn’t be hard to absorb. He noted that corporate tax rates in particular were much higher at other times in the company’s history.
He also said he didn’t care what happened to the new tax law and his death.
“99.7% will either go to philanthropy or to the federal government. I would prefer it when it comes to philanthropy, ”said Mr. Buffett. “But if they took it all, I wouldn’t mind.”
Also on Saturday, Berkshire faced two shareholder proposals asking the company to provide more information on climate risks and diversity. Despite the support of some major investors, both proposals were not accepted.
Berkshire’s Class A shares closed at $ 412,500 on Friday, down 1.3%.
Corrections & reinforcements
Warren Buffett said there is more to be done selecting stocks than figuring out what will be a wonderful “industry” in the future. In an earlier version of this article, Mr. Buffett was incorrectly quoted as “business”. (Corrected on May 1st)
Write to Geoffrey Rogow at [email protected]
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