By: Yan Zhang, Class of 2019
The Oracle of Omaha is a nickname for Warren Buffett, who is arguably one of the greatest investors of all time. As Chairman and CEO of Berkshire Hathaway (“BRK”), Buffett has generated 20.9% annual investment returns, versus the S&P 500’s 9.9%. Said another way, BRK stock has delivered 155x the total return of the S&P 500 over the last 53 years.
Dan Grimm (Class of 2019) and I planned a trek for 33 Boothies to Omaha, Nebraska for the BRK Annual Shareholders’ Meeting. Known as the “Woodstock of Capitalism”, the BRK Annual Shareholders’ Meeting attracts 50,000 investors and aficionados from all over the world, who come to hear Warren Buffett and his partner Charlie Munger deliver investment wisdom and life advice.
Throughout the day, attendees can wander about and visit the sprawling convention center, which showcases the unique subsidiary businesses of Berkshire Hathaway, some of which might surprise you. Most investors are aware of Berkshire’s stake in Kraft Heinz, which it teamed up with Brazilian private equity giant 3G Capital to acquire in 2013, but did you know BRK also owns GEICO, Dairy Queen, Duracell, Fruit of the Loom, Brooks Sports, and the BNSF Railway?
Duracell is one of the brands owned by Berkshire Hathaway
For some, the BRK Annual Shareholders’ Meeting is a reunion and a ritual. Beyond the famous Q&A with Buffett and Munger, the Meeting has taken on a life of its own throughout the years, and has evolved into a community gathering of fun, fellowship, and learning. I attended my first meeting in 2017 and immediately bought into the prevailing ethos. Buffet and Munger have long espoused the values of hard work, humility, and patience. Rather than grasping at straws in the dark, the pair preach the benefits of operating within one’s “circle of competence”. This mentality led to Berkshire’s avoidance of .com stocks in the late 1990’s. For a time, Buffett was seen as a laughing stock and as a man who couldn’t keep up with the times. When asked why he didn’t invest in rising internet stocks, he replied that he simply did not understand it. The cycle came full circle, and BRK outperformed its peers by a wide margin when the .com bubble burst.
As a soon-to-be Booth graduate embarking on a career in investment management, I attribute much of what I’ve learned to Buffett and Munger, and it was a joy sharing my experiences in Omaha with 32 other Boothies. My morning began at 2am, when we got in line at the CHI Health Center. From 2am to 7am, my friends and I caught up, shared stories, and ripped espresso shots to stay awake. When the doors opened at 7am sharp, we were the first down the stairs, and wrestled our way into front-row floor seats in a stadium of 50,000. The morning began with a short movie starring BRK executives, Hollywood celebrities, and professional athletes, giving the audience a taste of all the company’s accomplished over the past year. What followed next were five hours of Q&A, which the two elder statesmen handled expertly.
The most heated discussions centered on capital allocation (BRK has $112 billion of cash on its balance sheet) to succession (Munger is 95 and Buffett is 88), but here’s a sampling of other favorites:
Deteriorating Brand Power. As retailers launch reliable private label brands (AMZN: Amazon Basics, COST: Kirkland), how do consumer brands like P&G and Unilever compete?
Do People Buy Furniture and Luxury Goods the Same Way? Millennials are increasingly comfortable making online purchases, and that trend has extended to furniture (think: Wayfair, Casper). But BRK owns Nebraska Furniture Mart and Buffett believes consumers still want retail storefronts for big-ticket purchases.
Are Independent Board Directors Really Independent? If the Directors’ Compensation of $250k/year is a large portion of their total income, chances are they don’t want to kick the apple cart.
Don’t Fear Capitalism. Capital has been about efficiency and removing redundant jobs. Agriculture headcount is down 90%. No one wants to go back to being a blacksmith.
Delayed Gratification is Overrated. Would you rather save up and take your family to Disneyland for a week three years from now? Or take them for two days next week?
This trip was a bucket list item for many involved and our memories from this extraordinary weekend will last a lifetime. For further reading, the author recommends Berkshire Hathaway Letters to Shareholders, 1965-2018, Poor Charlie’s Almanac, The Warren Buffett Shareholder, and The Snowball.
Yan is a second-year student and Co-Chair of Booth's Investment Management Group. He'll be joining T. Rowe Price upon graduation as an Equity Research Analyst.