It’s that time once again to gather around the world’s most famous investor to glean what bits of wisdom the Oracle of Omaha has seen fit to bestow upon us. On Saturday, Warren Buffett and business partner Charlie Munger reprised their roles as the avuncular and folksy hosts of the annual Berkshire Hathaway meeting.
Buffett fielded dozens of questions ranging from micro investments to macro economics, while Munger chimed in with the occasional zinger. This year the two had lots to say about technology, trade relations and, of course, where to find value.
Apples, Not Rat Poison
Buffett praised Apple Inc. — one day after buying around US$13 billion worth of stock — for developing “extremely sticky” products. He also endorsed the tech giant’s share buyback program: “We own five per cent of it. With the passage of a little time, we may own six or seven per cent.”
The business partners were less enthusiastic about prospects for cryptocurrency, dismissing bitcoin and their ilk as the product of “charlatans” with no real value. Munger called it “rat poison squared.”
On the other hand, Buffett acknowledged a blind spot when it comes to tech, admitting that he felt similarly incredulous about Amazon: “The problem is, when I think something will be a miracle, I tend not to bet on it.”
What me worry (about a trade war)?
Buffett suggested fears of a trade war between the U.S. and China were overblown, and that investors shouldn’t get caught up in daily headlines. He said it was unlikely that the two economic superpowers were going to do anything disastrous when it came to global trade.
“It is just too big and too obvious,” he said, “that the benefits are huge and the world is dependent on [U.S.-China trade] in a major way for its progress, [for] two intelligent countries [to] do something extremely foolish.”
The separation of politics and money
One attendee asked point blank whether Buffett, who backed Hillary Clinton in the latest presidential election, would reconsider his stance on ethically questionable investments, like gun manufacturing.
The Oracle stood his ground, stating in no uncertain terms, “I do not believe in imposing my political opinions on the activities of our businesses.”
Later on in the Q&A, Buffett also made note of the enormous benefits that Berkshire is reaping from recent federal tax cuts. “You can agree politically or not,” he said, but either way Berkshire is going to cash in.
Fixer-uppers vs. Teardowns
Buffett defended his company’s investment in Wells Fargo, currently ensnared in a scandal, and suggested that some of Berkshire’s best banking investments came after scandals turned them into temporary pariahs. Berkshire, for instance, is reported to have earned a fortune from its investment in Canada’s Home Capital Group.
“I see no reason why Wells Fargo as a company, from both an investor standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes,” he said.
The feeling was decidedly less optimistic when it came to Berkshire’s investments in the newspaper industry. The business partners said the “decline is faster than we thought,” and that society would dearly miss the check on political corruption if local papers disappear.
Keeping his powder dry
Even as Buffett praised companies like Apple for distributing cash to shareholders, he dismissed any thought of a dividend for Berkshire shareholders. With U.S. markets on a tear as of late, Buffett said his phone is not exactly “ringing off the hook with good deals.”
In general, though, the Oracle was bullish on America and confident that Berkshire’s US$108-billion cash hoard would be better spent on investments than on cash distributions.
“There are opportunities with smaller amounts of money to do things that we just can’t do,” he said. “But my first inclination always would be to comb through things in the United States. Our problem is size, not geography.”