10 takeaways from Berkshire Hathaway's 2021 AGM (thread):

1) There's a lot more to investing than picking which industries look promising

Buffett noted there were thousands of car companies in the early 1900s; now there are only a handful.
2) Always prepare for the worst outcome, even if it doesn't materialise

Berkshire doesn't want to depend on the kindness of strangers in a crisis. The pandemic has reinforced the need to be as resilient as possible to shocks, so Berkshire can still be thriving in 50 years' time.
3) If you expect to find perfection you're going to be disappointed

Every company has something wrong with it that you probably don't even know about. This should make you more humble.
4) Run winners/trade less

Buffett admits selling shares in Apple last year was probably a mistake. Munger even pointed out this mistake to him.

While Buffett doesn't trade that much, he suggested Berkshire probably would have performed better if he'd traded even less.
5) Buffett regards Apple as an "extraordinary business" run by one of the best business managers in the world

It's clear he has huge admiration for Tim Cook - "Steve Jobs couldn't do what Tim Cook could do in many respects".
6) Buffett doesn't think the big US tech stocks are over-valued given where interest rates are.

In fact, they are "bargains" if low rates persist due to their incredible cash-generating abilities.

The question is - what happens to rates in the long run? No one knows.
7) The dream business is one that requires virtually no capital and grows a lot

That said, understanding the sustainability of growth is key.

People often make the mistake of focusing solely on the growth of the industry (see point 1) or whatever is flavour of the month.
8) The economy is red hot right now and there are inflationary pressures on raw materials. Price increases are generally sticking.

Buffett has been very surprised by the strength of the economic recovery, reinforcing the difficulty in making macro predictions.
9) Don't base investing decisions on economic predictions and don't chase returns .

Accept that you don't know what will happen to the economy and invest in a way that will deliver acceptable returns regardless.
10) Buffett made several interesting observations on the importance of culture:

- Thinks the biggest risk a business faces is having bad management and the biggest risk to a Board is appointing the wrong CEO

-CEOs have a habit of perpetuating the same myths which, due to...
…constant repetition, get accepted as common wisdom. This is very dangerous.

- The main thing Buffett cares about is preserving Berkshire's culture

- Buffett and Munger were asked if they think Berkshire has become too big and complex to manage effectively...
…The answer was a categorical 'No' due to Berkshire's extreme decentralisation.

This system only works if you have the right culture in the first place - i.e. good managers who can be trusted.

Munger noted the Roman Empire's success relied heavily on a decentralised system.
The full video of the 2021 AGM can be found in the CNBC link below. This is a fantastic resource on Buffett with links to past meetings, videos, interviews and more.

buffett.cnbc.com/warren-buffett…

• • •

Missing some Tweet in this thread? You can try to force a refresh
 

Keep Current with The Undercover Fund Manager

The Undercover Fund Manager Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @FMUndercover

25 Apr
5 of my favourite quotes from Anthony Deden, Chairman of Edelweiss Holdings:

"A little arrogance, over-confidence or lack of judgment results in disaster. Be it money or life in general."

"Always be a ‘doubting Thomas’ while analyzing investments."
"Investors who think like owners don’t indulge in the pseudo-intellectual activity of analyzing companies based on how the price of the stock will move the next year or the next."
"If a manager can simply replace the word ‘wealth’ with ‘savings’ when he thinks about his client’s money, he would begin to act and invest differently. Learn to manage money as if it were your own savings."
Read 4 tweets
2 Apr
In my view, companies run with an ownership mentality (usually founder/family influence or CEO with large equity stake) are more likely to endure & prosper than those run by agents (typical CEO of PLC).

In this thread, I compare & contrast business owner vs. agent mentality:
Owner: cares more about durability than near term growth. Will plant acorns, so future generations can enjoy the shade.

Agent: cares greatly about near-term growth prospects, both actual and perceived. Isn't all that concerned what the business will be earning in 10 years’ time.
Owner: typically seeks to grow in an incremental fashion, by expanding cautiously into new spheres, rather than in large leaps.

Agent: will entertain large acquisitions to accelerate near term growth, even if it introduces risks and fragilities.
Read 13 tweets
1 Apr
Lots of wisdom in yesterday's results from Fundsmith Emerging Equities (FEET), my fav quotes

"Growth cannot be thought about sensibly in isolation from returns. Rapid growth may be good news or bad news. It depends on how much capital you have to invest to generate that growth"
"The source of growth is also a factor to consider. Growth in profits from increasing prices can simply build an umbrella beneath which competitors can flourish...
…We are more interested in companies which have physical growth in the merchandise or service sold than simply pricing power, although having both is nice."
Read 10 tweets
25 Mar
How many holdings should you have in your portfolio?

It's a very personal decision and depends on a range of factors.

I prefer a reasonably concentrated portfolio (15-30 holdings) for 6 main reasons:

1) Good ideas are rare. When I have one it needs to make a difference.
2) Great businesses are rare. Great businesses that are also well managed are rarer still.

Adding sub-par companies to a portfolio increases risk and lowers potential returns. I agree with Phil Fisher – it’s better to own a few great businesses than a great many mediocre ones.
3) I like to thoroughly understand the businesses I own (especially important in a concentrated portfolio). There are only so many companies I can track and develop enough knowledge on.
Read 6 tweets
20 Mar
Nick Train on running winners:

"We are often asked why we rarely or never sell any of our holdings... Our answer to such questions boils down to an appeal to one of the oldest pieces of investment advice: RUN YOUR WINNERS."

"As an investment principle running your winners is...
…not infallible, because nothing is infallible in investment. But running winners brings some important benefits; benefits that, we believe, tilt the odds of being successful slightly more in your favour."

"Running winners brings two advantages. First, by resisting...
…the temptation to trade in and out of holdings you certainly avoid accruing transaction costs which are universally acknowledged as a drag on investment performance. People are too confident in their ability to predict the unknowable future and this encourages them to trade...
Read 5 tweets
18 Mar
10 investing lessons from Guy Spier, author of the excellent book - 'The Education of a Value Investor':

1) Most businesses succeed because they get a lot of small things right; the benefits of which compound over time.
2) Focus, simplicity and alignment of incentives are key:

“Focus all your time and attention on one portfolio, in which you yourself are invested, and you’re likely to get better results.”
3) Your environment is critical to investing outcomes - avoid anything that could exacerbate irrationality.
Read 10 tweets

Did Thread Reader help you today?

Support us! We are indie developers!


This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!