Berkshire Hathaway Hosts Shareholders
Posted May 5, 2018 7:29 p.m. EDT
Berkshire Hathaway’s annual shareholders’ meeting has become the biggest investing event of the year.
The latest one was held Saturday.
The meeting of Warren Buffett’s company started out five decades ago as a small gathering of shareholders in the cafeteria of National Indemnity. It’s now often referred to as "Woodstock for Capitalists.”
Tens of thousands of shareholders fill CenturyLink Center in Omaha each year to ask Buffett and Charles T. Munger, Berkshire’s vice chairman, questions about the conglomerate, investing, the economy and politics. And between bites of See’s toffees and sips of Cherry Coke, the pair doles out their brand of folksy wisdom and corny jokes.
Here are some of the highlights:
Buffett is sticking by Wells Fargo
Over the past two years, regulators and whistleblowers have revealed Wells Fargo employees were creating fake accounts using customers’ identities, forcing borrowers to buy unnecessary auto insurance, and overcharging on mortgage fees.
The Federal Reserve this year restricted its growth until it demonstrates it is complying with bank regulations.
Berkshire first invested in Wells Fargo nearly three decades ago and is the bank’s biggest holder with a nearly 10 percent stake.
In response to a question about whether it was time to abandon the bank, which has seen turnover in its executive suite and boardroom, Buffett said he thought Wells Fargo’s problems would only make it stronger in the long run.
“All the big banks have had troubles of one sort or another and I see no reason why Wells Fargo as a company, from both an investment standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes,” he said.
He specifically praised the bank’s chief executive, Tim Sloan, a longtime Wells Fargo executive who took over when his predecessor John Stumpf resigned at the height of the fake account scandal.
“I like Tim Sloan as a manager,” Buffett said. “He is correcting mistakes made by other people.”
Approval of Apple’s buyback plan
Berkshire is quickly building its stake in Apple.
Since Berkshire first invested in the iPhone maker about two years ago, the stake has grown into Berkshire’s largest holding. At the end of the first quarter, Berkshire owned $40.7 billion of Apple’s shares, up from $28.2 billion at the end of 2017.
So what does Warren Buffett think about Apple’s announcement that it plans to buy back $100 billion of its shares?
“I’m delighted to see them repurchasing shares,” Buffett said. “We own 5 percent of it. With the passage of a little time, we may own 6 or 7 percent because they repurchase shares.”
Munger added that he and Buffett don’t approve of every buyback plan, but he doubted Apple would find an acquisition target at a good price.
“The reason companies are buying their stocks is that they are smart enough to know it’s better for them than anything else,” Munger said.
What about Microsoft?
Given Berkshire’s investment in Apple, one shareholder asked why Berkshire never invested in Microsoft. (Bill Gates, Microsoft’s co-founder and a director at Berkshire, was sitting in the audience.)
“In the earlier years, the answer is stupidity,” Buffett said. But then Buffett added that his friendship with Gates had grown over the years and that he had stayed away from investing “because of the inference” that could be drawn.
Is Buffett semiretired?
The question of who will succeed Buffett has been a thread through many of the exchanges with shareholders.
In recent years, Buffett has handed off some of his investing duties to Ted Weschler and Todd Combs, Berkshire’s two portfolios managers, and in January, Buffett promoted longtime Berkshire executives Gregory E. Abel and Ajit Jain to oversee Berkshire’s businesses.
“I’ve been semiretired for decades,” Buffett replied to a question with a chuckle, but then he got serious.
“Ted and Todd each manage about $12 or $13 billion,” he said. “Together that’s $25 billion. They’re managing $25 billion and doing a very good job.”
He then quickly reminded the questioner of the size of the company’s assets: “I still have the responsibility for the other $300 billion.”
How is the health care venture?
A lot remains unknown about Berkshire’s health care partnership with Amazon and JPMorgan Chase more than three months after the companies announced the venture.
The three companies said in January that they were teaming up to try to find a better, cheaper way to provide health care to their own workers, a combined 1 million people. And they said if their idea worked, they would seek to share it with other companies.
Buffett on Saturday again called the cost of health care “a tapeworm in terms of American business.” He lamented the success other countries — he did not name any — have had in keeping their health care costs at a lower proportion of their gross domestic product.
But just how Berkshire’s partnership will address the problem remains a big question.
Buffett had no more details to offer Saturday. He said the people leading the effort are still searching for a chief executive.
They could announce a hire “within a couple of months,” he added.
“Whether we can bring the resources, bring the person, that CEO, is terribly important. Bring the person, support that person and somehow figure out a better way for people to continue to receive better medical care in the United States,” he mused. “We’ll see if that will happen.”