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Berkshire Hathaway 2012 Annual Meeting- The Wisdom of Warren Buffett and Charlie Munger

I was not able to make the trek to Omaha this year, but wanted to list a few of the investing gems that Warren and Charlie passed along.

Common sense advice from great investors, My investments, net worth and children have benefited greatly.
(I need it this year, the reason I didn’t make my third Omaha trip was my daughter’s wedding.)

Berkshire Hathaway Annual meeting 5/5/12

Warren Buffett
We’ll never risk what we have for what we don’t have and don’t need

Buffett’s comment that bonds are more like “return-free risk” than risk-free return

If you buy businesses for less than they are worth, you’re going to make money.
If you know which businesses you can and cannot value, you’re going to make money.

The beauty of stocks is they do sell at silly prices sometimes.
That’s how Charlie and I got rich.

Don’t select your investments based on politics.

Then I would turn to something much more interesting: buying businesses to keep.
I don’t want to be buying and selling businesses.

You don’t have to do anything to make money in the stock market.
Stick with businesses that you think you can value. It’s a marvelous game.

The mistakes we’ve made are where I misjudged the competitive position of the business.

In 53 years, I don’t think that Charlie and I have talked about macro effects
(when deciding whether to buy or sell a business).
When we find an attractively priced business that we understand, we buy it

Charlie and I think about worst cases all the time

Thinks an appropriate multiple for a business with strong competitive advantages
is probably 9 or 10 times pre-tax earnings

EBITDA is NOT equivalent to pre-tax earnings. It’s just nonsense.
But it works for the people that sell businesses.

It’s very hard for an unproductive investment to be a productive investment
over a long period of time.

We try to stay away from things that we don’t understand.
It isn’t that I don’t understand what the business does –I mean I don’t have a
reasonable fix on what the earnings power and competitive position will be in five years.

You have thousands of opportunities in stocks all over the world.
It doesn’t make any sense to spend five seconds thinking about new issues (IPOs).

Apple makes brilliant products, I just don’t know how to value it

We’ve looked at forest products companies. We’ve looked at several.
never found any that met our criteria. Easy to understand the business,
but the math has escaped us in terms of being compelling

Won’t take a risk (even a favorable one) if the downside means that Berkshire will go broke.
We’ll never risk what we have and need for things we don’t have and don’t need.

Charlie and I don’t need the money, why do we do what we do?
We jump out of bed excited every day. We get the opportunity
to paint our own painting every day. And it’s a painting that will never be finished

I would avoid medium-term or long-term government bonds. I think that’s the obvious answer

Charlie Munger:
“Everyone wants fiscal virtue — but not quite yet.”

Favorite risk control example: young employee was fired once ‘how can you fire me –
I’m one of your top producers?’… answer: I’m old and rich and you make me nervous

When you used the word EBITDA, I thought to myself, I don’t even like hearing the word

How do these super-smart people do really dumb things?
It’s explainable by the old proverb that ‘give a man with a hammer and he’ll assume the problem is a nail’

I wouldn’t worry… Mr Market will look after the share price over time

What we’ve done is learn enough from other people’s mistakes –
it’s a much more pleasant way to learn your lessons

Warren’s position on taxing for the rich has decreased my popularity in my country club.

Sources:
http://www.fool.com/investing/general/2012/05/06/berkshire-2012-prostates-gold-and-jealousy.aspx?source=ihpsitth0000003
http://blogs.wsj.com/deals/2012/05/07/berkshire-meeting-investors-react-to-buffetts-answers/
http://community.nasdaq.com/News/2012-05/berkshire-hathaway-shareholder-meeting-notes-part-i.aspx?storyid=139127

For more great info, read Warren’s annual shareholder letters:
www.berkshirehathaway.com/letters/letters.html

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