Meeting Recap: Inside the 2024 Berkshire Hathaway Meeting
/By Kelly Doyle
The Nebraska air buzzed with electricity. All around me, thousands of investors from around the world anxiously waited for the doors of the CHI Health Center Omaha to open. Finally, at 7 a.m. sharp, we were allowed into the arena, and our massive throng made a beeline for seats and settled in. It was May 4 after all, and the 2024 Berkshire Hathaway Annual Shareholders Meeting was about to begin.
Held annually for the past 60 years, the event known as the “Woodstock for Capitalists” drew 18,000 investors from around the world in 2024. People from all walks of life attended, including the likes of Bill Gates, former CEO of Microsoft®, and Tim Cook, CEO of Apple®.
Despite the different languages spoken, a strong spirit of camaraderie was evident. Everyone I met was proud to share how many years they’d been a Berkshire Hathaway shareholder or how many times they’d attended the annual meeting.
In my experience, it’s rather uncommon for the average investor to fly across numerous time zones on a yearly pilgrimage to attend a company’s annual shareholder meeting — especially one held in a small Midwestern town. More often, engaged investors might read a company’s annual report. A few may even attend the meeting remotely.
However, the yearly Berkshire Hathaway Meeting is an opportunity for thousands of investors to hear firsthand from the famed Warren Buffet aka the “Oracle of Omaha.” As the co-founder, chairman and CEO of Berkshire Hathaway, Buffet uses this opportunity to provide updates on his company’s performance and share his thoughts about the American and global economies. He also offers insights into business and investment decisions and dispenses general life advice in a live question-and-answer format.
Understanding the Uniqueness of Berkshire Hathaway
What is it that makes Berkshire Hathaway such a special company? To answer this question, you need to understand a bit more about the company and how it works. Berkshire Hathaway is an American multinational conglomerate holding company whose net earnings totaled $96 billion in 2023. The company’s model is to own either all or a portion of select businesses producing good economics that are fundamental and enduring. Here are a few examples of some of the company’s holdings as either subsidiaries or investments:
· Apple
· Coca-Cola®
· American Express®
· Kraft Heinz Company
· BNSF® Railway
· Duracell®
· Fruit of the Loom® Companies
· Jazwares® (maker of Squishmallows™)
· HomeServices of America®
· Gateway Underwriters Agency
· GEICO® Automotive Insurance
· Dairy Queen®
· NetJets®
· Oriental Trading® Company
· Pampered Chef®
· See’s Candies®
· W&W | AFCO Steel®
· And many, many more
With Buffet at the helm, Berkshire Hathaway has become one of the greatest businesses in America. From 1965 to 2022, the company’s stock averaged a 20% compound annual growth rate, which compares to 9.9% annualized return for the S&P 500 in that period, according to U.S. News.
Buffett’s success stems from his role as a “value investor”: a bargain hunter who finds undervalued companies with strong potential for growth and invests in them for the long term. As he explained in his 2023 annual report: “The lesson from Coke and AMEX? When you find a truly wonderful business, stick with it. Patience pays, and one wonderful business can offset the many mediocre decisions that are inevitable.”
This year’s meeting was the first held since the passing of Buffet’s renowned right-hand man, Charlie Munger, known to be the Bert to his Ernie, the Captain Kirk to his Doctor Spock, and the Batman to his Robin (as explained in a loving tribute at the beginning of the meeting). Buffet instead hosted the meeting along with two members of his senior management team: Ajit Jain, Vice Chairman of Insurance Operations, and Greg Abel, Vice Chairman of Non-Insurance Operations. The three kept the audience engaged and even enthralled over the course of the nine-hour day, though the absence of the charismatic Munger was certainly felt.
A video tribute was shown in Munger’s honor, followed by Buffet’s recap of the 2023 annual report, a special acknowledgement of a donation by a shareholder of $1 billion to the Albert Einstein College of Medicine to cover the tuition of every student in perpetuity, and lastly the hugely popular Q&A session. With CNBC’s Becky Quick moderating the latter, questions alternated between those from the audience and those from online submitters. As the real meat of the meeting, the Q&A session lasted five hours, though the time felt like it flew by. Below is an overview of 10 key topics discussed at this year’s shareholder meeting.
#1: Selling Apple
Berkshire Hathaway recently sold roughly 13% of its stake in Apple. As of February 2024, the holding company owned 5.9% of Apple, valued at about $176 billion. As Berkshire Hathaway’s largest holding, Apple accounts for about 50% of the company’s stock portfolio, which is worth over $300 billion. Berkshire Hathaway has been buying stock in Apple since 2016. With this recent sell, however, the technology company now comprises about 41% of the company’s stock portfolio.
Buffet didn’t have any particular reason for the stock sell. It simply came down to his years of wisdom and experience. The “light bulb will go on” at certain times, he said, and he’ll make a decision. In this case, it was selling some of Berkshire Hathaway’s stake in Apple.
Buffet said that people pay more attention than they should to the tax consequences of this type of appreciated stock sell. Yes, taxes were paid: 21% in federal corporate tax, to be exact. But it doesn’t bother Buffet because he feels it goes toward investing in America, which is a country he loves and is happy to help support.
#2: Buying American
Berkshire Hathaway has historically held stock in American companies only. Thus, a common question posed by several attendees from foreign countries, including China, Hong Kong, and Canada, was whether the company ever planned to invest in companies outside the U.S. For the foreseeable future, Buffett said Berkshire Hathaway would continue to invest strictly in domestic companies. However, some of those companies, such as Coca-Cola and American Express, are highly involved in foreign sales.
#3: Steady Performance in Insurance
As a financial planner, I’ve spent a lot of time discussing how recent insurance rate hikes have affected Southern California homeowners. While these higher rates have made a large impact on all homeowners, they’ve been an especially tough burden for retirees, who often must survive on fixed budgets.
With that in mind, I wasn’t surprised to hear multiple questions directed toward Jain asking for an update on Berkshire Hathaway’s insurance businesses. Due to climate change, he said, there’s a risk for more extreme and frequent natural disasters, such as wildfires, hurricanes, and flooding. As a result, Jain and Buffet confirmed that insurance rates will need to go up.
Despite this, Berkshire Hathaway’s leadership feels the company is safely positioned since they write policies with one-year terms. This creates opportunities to recalculate rates on a frequent basis. Buffet emphasized that he still likes the insurance industry because it’s something everyone needs. Plus, Berkshire Hathaway is able to offer less expensive policies than their competitors due to their underwriting expertise. While the Berkshire Hathaway’s insurance businesses continue to do well, strict regulations in some states have made it tough to operate. This has forced the company to withdraw from certain regions.
#4: Pros and Cons of Artificial Intelligence (AI)
When asked what impact AI may have on Berkshire Hathaway’s businesses in the future, Buffet responded with a historical comparison. He explained that, when the atomic bomb was invented, the “genie was let out of the bottle.” The rapid growth of AI has him wondering if it’s happening again. While there’s an enormous potential for good, he said, there may conversely be an enormous potential for bad.
Specifically, he feels there’s a huge risk for people being scammed out of money. Buffet shared a recent experience where he watched an AI-generated video of himself featuring his own voice that showed him asking his family for money. It was so realistic that he believed, without a doubt, his family would think it was authentic. While there are always going to be scams, the use of AI carries a potential for a new type of risk, he said.
On the plus side, incorporating AI into Berkshire Hathaway companies could help their businesses become more effective, efficient, and safe while providing more leisure time for employees.
#5: Advice from the Oracle
When asked for life advice, Buffet suggested writing your own obituary that includes the accomplishments you’d like to achieve. From there, go out and make it a reality. For instance, take a class that will help you reach your goals or marry the person you want to end up with. Choose the right heroes who are living the life you want (not measured by what they’ve accomplished but by who they are) and emulate them to create your own success.
As it pertains to what people are capable of, he said you’ve got to feel better about the future for your kids than you would have felt 100 years ago, no matter what the situation is. Buffet explained that those of us in the audience were incredibly lucky to live in this country, in this time, as compared to past generations. Two hundred years ago, a shepherd’s son and grandsons were destined to be shepherds. This is no longer the case since opportunities in the U.S. are endless.
#6: Making a 50% Return
Buffet offered this advice to young investors: Learn everything about everything about a small, focused topic or business. It’s also crucial to have a love for the subject. Most importantly, the subject can’t be money! Find out what your mind is best suited for and pound away at it.
#7: The Limitations of Clean Energy
Berkshire Hathaway owns 92% of Berkshire Energy, a holding company with its roots in renewable energy that controls power distribution companies in the U.S., Great Britain and Canada. When questioned about Berkshire Hathaway’s position on renewable energy, Abel said the industry’s transition from coal to renewable sources has been a “moving target” and, over time, the company’s goals had changed.
While Berkshire Hathaway’s leadership previously favored a strategy of a non-interrupted energy supply (e.g., to always keep the lights on at a hospital), they now understand that sometimes a loss of service is necessary (e.g., during events like wildfires). They also stated that a transition to renewable energy wouldn’t happen overnight and that the technology must advance further before it can be seen as a reliable, long-term solution.
Using solar battery storage as an example, Abel explained that the only economical solution today is a battery with four hours of capacity. This forces homeowners with solar to rely on traditional electricity sources for their nighttime needs once that capacity is depleted.
Another example of the current limitations of renewable energy involved this year’s Earth Day. Using renewable wind energy, Berkshire Hathaway was able to supply the electrical needs for the entire state of Iowa for the whole day. However, the next day the winds died down, and they were unable to provide the same level of support. Thus, the technology still has quite a way to go before it can be considered a viable, full-time alternative to traditional electricity.
#8: Sitting on $182 Billion in Cash
At the time of the annual meeting, Berkshire Hathaway had $182 billion of available cash with which to make investments. So why isn’t it being invested?
No one at the company, including Buffet, knows how to use if effectively. Buffet said he hasn’t seen any compelling proposals that can beat the U.S. Treasury’s 5.4% rate of return. To explain this further, Buffet resorted to baseball terms, stating that they wouldn’t swing at every pitch. They also wouldn’t swing on the third pitch just for the sake of swinging.
In other words, the company won’t make any investments until the right ones come along. He iterated that they aren’t on some sort of anti-investment strike; they just haven’t found anything deemed worthy.
The leadership team also discussed the federal deficit, which Buffet refuses to “work himself into a stew” over. The deficit has been there for decades, but it wasn’t a huge problem until inflation took off in 2020. While it continues to be an issue, the treasury market will be acceptable for a very long time.
Buffet added that Jerome Powell, the Chair of the Federal Reserve Board, is not only a great human being, but he’s also a very, very wise man. However, he doesn’t control fiscal policy. While the media is focused on what the Fed under Powell is doing and saying, Buffet reminded the audience that this is really a fiscal issue (which is in the Court of Congress, not the Federal Reserve).
#9: The Auto Industry and Self-Driving Cars
At one point, a reference was made to Tesla’s recent earnings call and a comment made by former Tesla Chairman Elon Musk that self-driving cars were safer with fewer accidents. This spurred an attendee to ask: “Shouldn’t insurance rates decrease as a result of this and, if so, would it hurt Berkshire Hathaway’s insurance company?”
In reply, the Berkshire Hathaway leadership team said that, while the number of accidents had gone down, the cost of individual accidents had gone up. Automation simply shifts the expense from the operator to the equipment provider. On the topic of clean energy vehicles, the leadership team doesn’t feel they have any specific talent to bring to this area, so don’t look for them to pick investment winners anytime soon.
#10: Buffet and Munger
Since this was the first shareholders meeting without Munger, the event organizers showed a touching video detailing the decades-long friendship between Buffet and Munger. One of the most moving moments for me (and I suspect most of the audience, judging by the response) occurred when a young teenager asked: “If you could have one more day with Charlie, what would you do?”
Buffet said that he had fun doing everything together with Munger and that, when a thing failed, it was often more fun because he had a partner to help dig him out of a hole. He had no doubts about Munger and trusted him implicitly. They never once had a fight.
He then suggested we all determine who our special people are, figure out how to meet them tomorrow, and see them as often as possible because why wait for tomorrow?
After returning home, I was extremely glad I made the trip to Omaha. The experience was life-changing, and it was easy to see firsthand why Berkshire Hathaway remains strong despite recent changes in their leadership. And it looks as if this will continue for the foreseeable future.
If you’re ready to talk about your finances, attending the Berkshire annual shareholder meeting next year, or you just want to say hello, don’t wait for tomorrow. Give us a call today!
