30 May Craig Goes to Omaha
Chairman of Saturn Portfolio, Craig Stobo, accompanied a group of Elevation Capital executives and investors to the Berkshire Hathaway ASM in Omaha, Nebraska in April.
The Annual Shareholder Meeting takes place in the huge Century 21 basketball stadium. This year’s meeting was full, but unlike last year’s 50th anniversary did not require additional space in the neighbouring hotel conference venues for the approximately 50,000 shareholders who attended.
The best seats are only obtained by queuing early! The queue forms at 5am, doors open at 7am and the meeting starts at 8.30 am with the send up company movie. Questions come from rotating panels of stock analysts and journalists but also from shareholders in the audience who address the meeting via microphones placed at different levels of the stadium.
The questions come from an increasingly international audience and this year for the first time the ASM was streamed worldwide. Answers from Warren Buffet and Charlie Munger are unscripted and range from company valuations, their thoughts on acquiring wisdom, the Trump phenomena, the strategy behind recent acquisitions, succession planning and inheritance through to the health benefits of Coca Cola and Sees Candy.
Warren and Charlie chair the shareholders meeting by themselves. Their frank and ironic interactions with the audience and between themselves is what attracts such huge numbers of admirers.
Warren also takes the opportunity to remind shareholders of his personal $1m ten year bet that the S & P 500 Index will outperform five unnamed hedge funds selected by New York firm Protégé Partners. You can view the bet on www.longodds.com. If Buffett wins the proceeds go to charity.
There is a small lunch break to enable shareholders to roam the company’s products and services on display in the basement. The meeting resumes until mid-afternoon and upon its close the Berkshire Hathaway Board meets to determine its formal business.
CEO Warren Buffet is 85 and Vice Chairman Charlie Munger is 92. Their leadership has enabled the company to grow from its inception in 1965 as a small textile company to the successful listed holding company it is today. One thousand dollars invested in Berkshire Hathaway in 1965 would be worth over USD$ 11 million today.
The city of Omaha has many residents who have benefited from their investment with Berkshire Hathaway and you can see some of this capital recycled into local philanthropic causes and new companies.
To some observers the Berkshire Hathaway ASM is the Woodstock of value investing. To me it is an opportunity to attend a conference on value investing (the difference between market price and intrinsic value), to meet similarly minded value investors from all around the world and at the ASM to be reminded of the benefits of buying great companies at fair prices.
Warren Buffet’s investment philosophy has changed over the years from trading cheap companies to buying great companies at a fair price. He ensures he has great management in the companies Berkshire Hathaway owns, reinvests any dividends, patiently waits for compounding returns and looks for opportunities to deploy cash reserves into mispriced securities. Berkshire Hathaway has only a small head office team but accountability for performance is delegated to the CEOs of the companies Berkshire owns.
Assessing the intrinsic value of securities and the ability to patiently wait for buying opportunities are rare skills. It was a pleasure to be in Omaha where Warren still lives in his original family home to see and hear the long term benefits of these skills in action.
Craig Stobo
Chairman, Saturn Portfolio Management, May 2016
Early morning queue at ASM. A stadium full of Berkshire Hathaway shareholders