by Ben Claremon | Research Analyst
BERKSHIRE
This past weekend’s trek to Omaha for the Berkshire Hathaway annual meeting represented the fifth consecutive time I have ventured to see the Oracle of Omaha and the man they call Charlie share their wisdom. Sorry folks, I didn’t take notes from the meeting this year. I have decided to pass that torch along to the next generation of note takers. However, the upshot of not taking notes is that I was able to absorb more of what was said in real time. I am sure that a comprehensive set of notes will show up on the internet in no time but in the meantime I wanted to share a few of my takeaways:
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- While the idea of having a short seller ask questions was certainly compelling, the execution was lackluster. Unfortunately, it felt as though Doug Kass was far more concerned with promoting his own firm than asking tough questions. At one point Munger even joked that he could make a certain short point better than Kass was. Accordingly, my personal preference for subsequent years would be to have someone who knew the company really well and who owned the stock play the devil’s advocate.
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- There is definitely a lot of value in being reminded over and over again by Buffett and Munger about the importance of owning good businesses. The stock markets’ recent rise has limited the number of good businesses that are selling at a large discount to intrinsic value and many investors are likely feeling the urge to sacrifice quality for cheapness. While doing so can make sense if there is an adequate margin of safety, making money in cyclical businesses or those without competitive advantages is just a lot harder and we all have to be cognizant of the additional risks we are taking on.
- I think it is very fair to question why Howard Buffett is the right person to be the non-executive chairman once Warren is gone. At the end of the day, Berkshire’s greatest risk is in the insurance company and the major thing that could legitimately lead to a permanent impairment of investors’ capital is poor underwriting. Ajit Jain is clearly viewed as a superhuman underwriter but there is always the risk that Ajit loses his way. I am not trying to be a heretic and suggest that anything is going to happen to Ajit. All I am suggesting is that it is fair to ask if Berkshire would be better served by having a prominent insurance executive serve as the chairman in order to help protect against tail risks.
MARKEL
Of course, these days there is so much that goes on in addition to the Berkshire meeting, it is not hard to fill every minute of the weekend. One event that I always enjoy attending is the Markel breakfast on the Sunday after the meeting. The event has grown significantly over the last few years and this year’s version attracted more people than I had ever seen. People come to see Tom Gayner and Steve Markel pontificate about equity markets, insurance, private market deals and macro trends. Luckily for me, I didn’t have to wake up at 4am and stand in the cold for 3 hours just to get a good seat. I also had the opportunity to take notes from the event. So, if you are interested in Tom Gayner’s views on inflation, favorite new books, thoughts on Fairfax Financial or if you want to know which of Markel’s businesses he thinks are like See’s Candy, I think you will enjoy the following notes. As always, these were taken in real time without the use of a recording device so please excuse any instances where I was unable to capture the exact nature of what was said. Until next year!
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