On May 4, local time, Berkshire Hathaway's annual shareholders' meeting will be officially held in Omaha.
In this event, known as the "Spring Festival Gala of the investment community", the 94-year-old Buffett will not be accompanied by his old partner Munger, and the company's vice presidents Ajit Jain and Greg Abel will appear together. In the newly released "Attendee Guide", the "God of Stocks" will randomly select and answer any questions raised by shareholders, similar to last year, and 40-60 opportunities are expected.
As the Fed's interest rate hike cycle reaches a critical tipping point, how will the "Omaha Prophet" interpret his investment philosophy this time, what is the outlook for the U.S. economy, whether there are good investment opportunities, and whether there will be more clues to retirement...... This shareholders' meeting is full of highlights.
The first financial reporter sorted out the 7 categories of issues that investors are most likely to mention at the shareholders' meeting:
1. Views on the U.S. economy
The latest data showed that the GDP growth rate in the United States unexpectedly fell to 1.6% in the first quarter, far less than the 3.9% in the fourth quarter of last year.
Warren Buffett once said that you should never short the United States. Last year, amid the impasse over the U.S. debt ceiling, he reaffirmed his belief that the U.S. would eventually avoid falling into a technical default. After many rounds of economic cycles, how Buffett views the state of the U.S. economy at this stage will become one of the focuses of investors.
2. Will it continue to reduce its holdings in Apple?
In the fourth quarter of last year, Berkshire Hathaway reduced its holdings of 10 million Apple shares. The outside world will be watching closely to see if Berkshire further reduces its stake in Apple and Buffett's explanation for the previous sell-off.
One of Apple's important attractions is its customer loyalty. In addition to constantly improving the iPhone's features, Apple CEO Tim Cook is working to eliminate sales fluctuations at the end of the iPhone's major upgrade cycle and encourage consumers to stay in Apple's ecosystem.
In addition, Apple's lucrative capital return program is another reason why it attracts Warren Buffett. Apple returned more than $15 billion in dividends to shareholders last year, and since the beginning of 2013, Apple has repurchased $651 billion worth of common stock. This, combined with a rise in stock prices, means that Berkshire has become one of the biggest beneficiaries of Apple's growth in recent years.
But stiff competition from smartphones is eating into Apple's original strengths. According to a report released by Counterpoint this month, Apple's iPhone sales in China fell 19.1% year-on-year at the end of the first quarter, the worst quarterly performance since 2020. Apple's market share in China fell to third place with 15.7 percent, behind Vivo's 17.4 percent and Honor's 16.1 percent. "Apple's sales declined in the quarter as Huawei's return directly impacted Apple's sales in the high-end market. In addition, Apple's demand for substitution has decreased slightly compared to previous years. ”
3. How to see the future of artificial intelligence
Last year, when shareholders asked for their views on artificial intelligence and robotics. Buffett joked that no AI would replace the company's vice chairman, Jain, and warned of the potential risks of AI, comparing it to the development of the atomic bomb.
As of March 15, Nvidia was not one of Buffett's major holdings in Berkshire Hathaway's overseen portfolio.
Apple, as Berkshire's No. 1 stock, is accelerating the application of artificial intelligence technology. CEO Tim Cook has said this is critical to the company's long-term growth strategy.
Amazon is also actively expanding the development and application of AI technology, including analyzing purchased products for recommendations and allowing its Amazon Web Services (AWS) customers to build applications using generative AI to tailor ads and improve customer interactions. In addition, Amazon is developing its own graphics processing units (GPUs) for its internal data centers, which are designed to complement or even replace Nvidia's products.
Snowflake, a cloud data warehousing company, Berkshire's other holding company, almost certainly made the investment decision by two of its investment deputies, Todd Combs or Ted Weschler. Snowflake announced a partnership with Nvidia to allow its accounts to use Nvidia's high-performance GPUs, and Snowflake also provides its customers with generative AI solutions to help train, customize, and deploy large language models.
The market is also waiting to see if the stock god will make another historic investment after Apple.
4. Bitcoin's view
Digital currencies have been one of the topics of discussion at shareholders' meetings over the past few years. Since the beginning of this year, due to the Federal Reserve's interest rate cuts, geopolitical factors and the "halving" effect, the price of cryptocurrencies, including bitcoin, has hit a record high.
Similar to Munger, Warren Buffett is one of Bitcoin's staunch opponents. In 2018, he compared Bitcoin to "rat poison" and said that cryptocurrencies would end up badly because they didn't generate any value associated with the asset.
Therefore, if an investor asks about digital currencies, the answer from Warren Buffett is likely to remain no, and once again advises investors to stay away.
5. Cash reserves and buybacks
Berkshire's cash reserves rose to a record $167.6 billion at the end of 2023, up $10.6 billion from $157 billion at the end of the third quarter of 2023.
Chen Kaifeng, chief economist of Huisheng Financial Management Co., Ltd., said in an interview with Yicai that the high cash reserves are partly due to the large reserves required by the insurance business, and there have been many natural disasters in the United States in the past two years, and the compensation of insurance companies has risen a lot, including car insurance. On the other hand, some businesses also generate a lot of cash flow, such as investments in energy.
Warren Buffett said last year that the company would rather strike a deal than sit on $130 billion in cash. He highlighted the complexity of acquiring public companies because of the longer time it takes, faces shareholder votes and other rules, and said that there are not many private companies with the required size right now. However, he is also waiting for an opportunity, citing the 2008 global financial crisis and expecting Berkshire to receive similar calls in the future.
With the Federal Reserve keeping interest rates unchanged, Berkshire's Treasury yields are close to 5% and have been buying.
Over the past year, Berkshire has used about $9.2 billion to buy back shares.
In 2021, Warren Buffett responded to the question of buybacks. Essentially, he said, buying back shares is distributing cash to people who need it and who choose to cash out by selling it to the original company, "which is a savings tool." Shares are bought back by a vote of shareholders, and most people do not do so to receive dividends. ”
At this shareholder meeting, Buffett may once again face questions about cash reserves and buybacks.
6. U.S.-China Relations and Overseas Markets
U.S.-China relations are also a focus for investors.
Munger said last year: "If there's one thing that should be done, it's to get along with China and do a lot of free trade with China...... This is in our common interest. He cited Apple as an example of how the U.S.-China relationship should work, and criticized the growing tensions as foolish. Buffett responded to Munger's remarks by saying that the two countries need to understand that they cannot put too much pressure on each other. By working together, both the United States and China can become better nations.
When it comes to Berkshire's investment in China, BYD has to talk. On September 29, 2008, Berkshire spent HK$1.8 billion to buy BYD at HK$8 per share.
In contrast, Munger invests more broadly in Chinese companies. He has said that investing in China allows you to buy some better companies at a cheap price. "Investing in BYD is the best and unique investment decision he has ever made for Berkshire. BYD is my favorite stock. ”
Now Warren Buffett is also looking east, and in addition to the United States, Japan will become Berkshire's second largest investment destination. Since 2020, he has bought a total of 1.6 trillion yen from five major trading companies, including Mitsubishi Corporation, Mitsui & Co., Itochu Corporation, Marubeni Corporation, and Sumitomo Corporation, and said that the investment will be long-term. The value of holdings in these companies by the end of 2023 was 2.9 trillion yen, and Berkshire's year-end unrealized dollar gains stood at 61% to $8 billion.
Recently, Berkshire has priced seven tranches of yen bonds totaling 263.3 billion yen. Warren Buffett's move sparked speculation that he may be considering continuing to increase his investment in Japan. Berkshire has become one of the largest overseas issuers of yen bonds, and credit spreads on yen bonds have narrowed to their lowest level since September 2022 as the Bank of Japan is not in a hurry to raise interest rates again and the yen has continued to weaken recently.
At the shareholders' meeting, issues such as China-US relations may also be mentioned again, while views on overseas market opportunities are also being watched.
7. Missing Munger and retirement
In this year's annual Berkshire letter, Warren Buffett said that his conglomerate worth more than $900 billion has become a fortress that can withstand even unprecedented financial disasters.
In his letter, Buffett wrote a section dedicated to Munger, who died last November. Buffett said his long-term business partners were the key driving force behind the conglomerate. "Charlie is now Berkshire's 'architect' and I am the 'general contractor', building his vision day in and day out. ”
Munger's death deprived Buffett of his closest partner for more than 60 years, and under their leadership, Berkshire became a business magnate with dozens of businesses, including Geico Insurance and BNSF Railroad. Since Warren Buffett took office in 1965, Berkshire's stock price has risen more than 43,000 times, with a compound annual increase of 19.8%. In contrast, the S&P 500 is up just 310 times, or 10.2% on an annual basis.
As for the successor, Buffett has previously assured investors on several occasions that Vice Chairman and designated successor Abel is ready in every way to become Berkshire's CEO tomorrow.
With Munger gone, the topic of retirement is likely to continue to be the focus of the conference. Chen Kaifeng told Yicai that he does not expect Ba Lao to retire, because the successor has been arranged, the main investment has been handed over to the investment manager, and he only needs to exercise the duties of the chairman.
(This article is from Yicai)