Warren Buffett discusses investing in his latest Berkshire Shareholder Meeting where he wows his audience with near-record Q1 operating profit, which rose 20%, to $7.02 billion, or about $4,600 per Class A share, from $5.87 billion a year earlier. This was the second-highest level on record (going back to 2010) and was only surpassed by the third quarter of 2019. The gains were fueled by the firm’s insurers and its group of manufacturers, servicing businesses and retailers.
“Warren Buffet wows his audience with near-record Q1 operating profit, which rose 20%”
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Despite the recessionary impact on most sectors of the economy due to the pandemic lockdowns Warren Buffett discusses investing on an upbeat note
“Our business went well this has been an unusual recession it has been local been localized as the industry to an extraordinary extent. Other areas of business have been decimated international air travel” said Warren Buffett.
Aided by various slides Warren Buffett discusses investing concerning the evolution of the world’s largest companies spanning three decades
“I wrote a list of the largest 20 companies by market capitalization in the world. The top by market capitalization is US’s Apple at $2.05 T, which is the entire market capitalization on the FTSE100. Saudi Arabia’s Saudi Aramco $1.92 T, 95% state-owned, and France’s Lvmh Moet at $ 326B” he said.
The List is dominated by the US and Asian companies, particularly China’s Alibaba $624B Tencent $752B, and one European company. See 1:52:26.
“Of the six top companies, 5 are in the US. In 1790 we had 1% of the world’s population 4 million people 600,000 of them were slaves. Ireland had more people than the US” said Warren Buffett.
So, we had a map for the future and aspiration that somehow 230 years later, which would leaves us with 5 of the 6 top companies in the world.
“Our business went well this has been an unusual recession it has been local been localized as the industry to an extraordinary extent. Other areas of business have been decimated international air travel”
Warren Buffett discusses investing success in the US down to a “system that works well”
Warren Buffett then looks up at the audience, paused and said, “look at the list and tell me how many will be on the list in the next 20 years”.
He then presented a second slide of the top 20 in 1989. “There are two things that should grab your attention none of the top 20 are on the list 30 years ago are in the top 20 today. None” said Warren Buffett. Back in 1989 six US companies were on the list, they included GE, Exon, IBM, Merk.
“But none made it to the list 30 years later” he said.
“There is a lot more to picking stocks than figuring out what is going to be a wonderful future. Very few people picked a winner with Ford becoming the dominant company” – Warren Buffet
Japan had a long bull market with half of the top 20 largest companies being Japanese. Today there are no Japanese companies on the 20 twenty list.
“ The largest company in 1989 was Industrial Bank of Japan, which has gone from $ 104B.
Today’s largest company in the world is Apple $2.5T, worth 20 times more.
“That tells you something about equality and a little bit about inflation. It tells you that the capitalist system has worked incredibly well especially for the capitalist” he said.
Warren Buffett discusses investing as a necessary way of advancing
“The main thing is to be aboard the ship. Overall equities were the place to be, you’d do well if you had a diversified group of equities” he said.
Warren Buffett discusses investing in 1903 when Henry Ford was about to change the world with the mass production of the internal combustion vehicle
“So, what was the place to be 1903?” he asked. “Let’s assume you had seen 1903 interstate highways being built, you would say this is going to be easy it is going to be autos cars” said Warren Buffett.
The next slide showed a list of auto companies during the early 1900 hundreds. “Just beginning with Ma, as you can see there were almost 40 companies. By the 1930s there at least 2,000 companies because clearly, they had an incredible future” he said. “In 2009 there were three left, two went bankrupt” said Warren Buffett.
Here is the takeaway to Warren Buffett discusses investing theme
“There is a lot more to picking stocks than figuring out what is going to be a wonderful future. Very few people picked a winner with Ford becoming the dominant company” he said.
Concerning airline stocks during what seems like an endless pandemic Warren Buffett said that he would still not buy airline stocks.
We have big exposure to business travel we own 19% exposure with American Express.
“interest rates are the value to assets as gravity is to matter” – Warren Buffet
Warren Buffett discusses investing also in the era of massive monetary easing and high-tech stock valuations
The billionaire value investor doesn’t think it is crazy investing in tech stocks with high valuations. “Interest rates are the value to assets as gravity is to matter” he said. Warren Buffett noted a recent treasury auction where investors bought 40 billion USD of four-week treasury at zero interest rates. Relatively low-risk assets now have negative real yields, treasuries are a yardstick by which other assets are valued he noted. “If I could reduce gravity by 80%, I would be in the Tokyo Olympics Jumping” he said.
“So, with real interest rates in negative territory if you have got a company that can convert cash into revenue and profits that stock is not cheap” he added.
His Will is going to be a public record 99.7% of my estate will either go to philanthropy or the Federal Government.
Warren Buffett discusses investing in the era of modern monetary policy, which could fund a universal income
“85% of people got a 1400 USD cheque, a couple of years ago we were saying 40% of people couldn’t come up with a 400 USD. People feel better, people lending money don’t feel good but it causes stocks to go up. So far so good, if it doesn’t cause anything else you can count on it continuing in a very big way. So, he is hinting that UBI hinting around the corner.
“If I was told that I would be shot if I didn’t get the best result, I would rather own stocks today rather than bonds” he said
Berkshire fund has 10-15% of its total assets in cash.