Buffett's shareholders' meeting six points of interest: how to use the huge amount of cash? How to evaluate Musk?

Known as the "Spring Festival Gala of the Investment Community", Buffett's shareholders' meeting will be held soon.

From April 30 to May 1, local time, the 2022 annual shareholders' meeting of Berkshire Hathaway of the "god of stocks" Buffett will be held in Omaha, Nebraska, USA, which is the second return to offline after two years.

The highlight of the shareholders' meeting will be a five-hour question-and-answer session, in which Buffett, 92, and his "golden partner", Munger, 98, will once again appear together.

Since the beginning of this year, inflation has continued to be high, the Federal Reserve has begun to tighten monetary policy, superimposed on the impact of the Russian-Ukrainian conflict, and the global market has been in turmoil. In this context, what will be the highlights of this much-anticipated investment feast?

Point 1: How to lay out under the Russian-Ukrainian conflict?

The Russo-Ukrainian war has had a wide-ranging impact on global markets, and while the impact of the COVID-19 pandemic has not dissipated, the world is also facing a series of risks such as high inflation and tightening of central bank monetary policy this year.

At present, global markets are focusing on the Fed's May interest rate meeting next week, and it is expected that the Fed is likely to raise interest rates by 50BP and start a balance sheet reduction. In an interview on April 14, Buffett praised Fed Chairman Jerome Powell's handling of financial market chaos quite well. How Buffett will analyze the recent macro trend and what kind of investment strategy Berkshire will have under the Russian-Ukrainian conflict will become a major focus of the shareholders' meeting.

Watch point two, how to use the huge amount of cash?

Berkshire's cash and cash equivalents at the end of 2021 amounted to $144 billion, of which $120 billion was U.S. Treasury bonds, all due within a year.

"Charlie (referring to Buffett partner Charlie Munger) and I have agreed that Berkshire (and our subsidiaries other than BNSF and BHE) will always hold more than $30 billion in cash and equivalents. We want the company to be financially indestructible and never rely on the kindness of strangers (or even friends). We both love to sleep soundly, and we want our creditors, insurance claimants, and you to sleep soundly too. Buffett said in a letter to shareholders that he did not really like to hold such a high amount of cash and cash equivalents.

How does the "stock god" use as much cash as possible? The answer is buyback.

In the fourth quarter of 2021, Berkshire repurchased $6.9 billion in shares, bringing the overall repurchase amount to about $27 billion for the whole of last year, a new high. In 2020, Berkshire just set a record of $24.7 billion in buybacks for the full year. Nearly two months into 2022, Berkshire has invested another $1.2 billion in stock buybacks as of Feb. 23.

In addition to buybacks, does Buffett intend to use this huge amount of money to make a big splash this year? Worth looking forward to.

Look at the third point, the motivation for several large investments this year?

Somewhat unusually, Berkshire has made at least three larger investments this year.

On April 6, local time, Berkshire submitted documents to the U.S. Securities and Exchange Commission (SEC) showed that from April 4 to April 6, Buffett bought 11.1336 million shares of Hewlett-Packard at a total price of $399 million, spending about 2.534 billion yuan at a purchase price of $34.88 per share to $36.43 per share.

So far, Berkshire holds nearly 121 million shares of HP, equivalent to 11.4% of Hewlett-Packard's shares. Based on Hp's closing price of $34.91 on April 6, the shares are worth about $4.2 billion.

This is Berkshire's third large-dollar deal in more than a month.

From March 1 to March 16, Buffett spent a total of $5.614 billion ( about 35.6 billion yuan ) to buy a total of 163 million shares of Western oil companies. On March 21, Buffett announced the acquisition of insurer Alleghany for $11.6 billion in cash, a move that expanded Berkshire's portfolio of insurers including Geico and General Re.

Is buffett's pen behind these operations? What is the rationale behind it? What kind of signal is released? We look forward to receiving more information at the General Meeting of Shareholders.

Watch point four, the retirement schedule will be revealed?

On April 19, the California Public Employees Pension Fund (CalPERS), the largest public pension in the United States, filed a filing with the U.S. Securities and Exchange Commission (SEC) saying it plans to vote for a shareholder proposal by Berkshire Hathaway that would remove Buffett from his chairmanship. The agency argues that Buffett's simultaneous roles as chairman and CEO "greatly weaken" both positions, thereby weakening the corporate governance structure.

According to the schedule, this year's shareholder meeting will vote on a series of shareholder proposals. However, Berkshire's board of directors has previously made it clear that it has opposed this proposal, and the actual probability of this proposal passing is not large.

Buffett is now 92 years old, and there is a lot of concern about when he will officially retire.

In an interview with CNBC on May 3, 2021, Buffett admitted: "The directors unanimously agreed that if I stepped down, Greg Abel, vice chairman of Berkshire's noninsurance business, would succeed as CEO." ”

Buffett admits that Berkshire's board of directors has reached a consensus on who should immediately succeed the CEO: "If anything happens tonight, Greg will take over as CEO the next morning." If anything happens to Greg, another vice chairman, Ajit, takes over. ”

In the appendix to the 2021 annual report, a letter to shareholders signed by Greg Abel also appeared, mainly describing Berkshire's sustainability efforts. This is the first time that a signed letter other than Buffett appeared in Berkshire's annual report.

That's a strong signal, but Buffett said in an April 14 interview that he still works every day and has no plans to retire. At this shareholders' meeting, will Buffett announce the "handover of the baton"?

How do you view China's investment opportunities?

According to data released by Buffett in the shareholder letter, as of the end of 2021, BYD ranked 8th in Berkshire's holdings, with a market value of nearly $7.7 billion, accounting for 7.7%, down slightly from 8.2% in the previous year.

It is also the only Chinese stock buffett currently holds.

In September 2008, Buffett opened a position in BYD at a price of HK$8 per share on the recommendation of Munger, and spent HK$1.8 billion to buy 225 million shares, with a shareholding ratio of 8.25%. This investment, Buffett has not made any adjustments so far, has been holding so far.

Buffett has repeatedly expressed optimism about China's economy, and at the 2019 shareholders' meeting, Buffett said: "China's market is quite large, and we like this kind of large market." Because Berkshire's own capital management volume determines that we can only carry out capital operations in about 15 countries... Our investment in China is already ideal, but there is much more we can do. ”

"China has 20 percent of the world's population, and its potential has not yet been fully realized." In an exclusive interview with Yahoo Finance, Buffett also mentioned that he has always been open to investing in China, and he has invested in PetroChina in China and Munger has invested in BYD, both of which have yielded good returns.

This time, will Buffett and Munger talk about the Chinese economy and China's future investment opportunities? Will Berkshire increase its investment in China?

Watch point six, how to comment on Musk who has promised to acquire Coca-Cola?

After taking down Twitter, Tesla CEO Elon Musk started the idea of Coca-Cola again. On April 28, Musk tweeted, "Next I'm going to buy Coca-Cola and reintroduce cocaine." ”

Buffett has a pretty "long-term affection" for The Coca-Cola Company, and has been firmly holding it since Buffett bought Coca-Cola stock in 1988. As of the end of last year, Berkshire still held a 9.2 percent stake in The Coca-Cola Company.

"It shows the product of the United States. He's competing with General Motors, Ford, Toyota, people who own everything. He has an idea, and he's winning. Interestingly, in an exclusive interview on April 14, Buffett praised Musk.

So, after Musk wins the social media giant Twitter for $44 billion and then targets Coca-Cola, will Buffett's view of Musk change? The market will wait and see.