No cameras are permitted. No transcripts are available. Only shareholders are even allowed to attend. But we have a ringside seat at the Berkshire Hathaway (BRK-A)(BRK-B) annual meeting in Omaha, Neb., where Tim Beyers and other Motley Fool analysts are live-blogging from the event of the year. (Join the chat here.)
For more than four decades, Warren Buffett and Charlie Munger have held court during these famously witty and insightful QA sessions. (The pair has commented on almost everything — from sex and markets, to China, to Google’s (GOOG) competitive advantage, to nuclear disarmament.) Here’s a closer look at what they talked about in today’s meeting.
1. On his health. Buffett says he loves what he does and still loves coming to work. His energy and enthusiasm during the QA seems to corroborate his claim. Nevertheless, he’s suffering from a form of prostate cancer, which makes some investors nervous.
Buffett sees four doctors for this condition. Less than a month ago, he and his family visited them, and none of the treatment recommendations that came back were all that troubling.
Says Buffett: “The ones they recommend do not require a day of hospitalization. They don’t require a day off work, and there’s a 99% survival rate. Maybe I’ll get shot by a jealous husband. In all seriousness, it is a non-event. The med center is about two minutes from the office. For two months, I’ll walk over there.”
Munger adds: “As a matter of fact, I rather resent the attention he [Buffett] is getting. … I don’t know [if I have prostate cancer] because I don’t let them test for it.”
2. On taxes, the economy, and his role as a political figure. Buffett says that if you look at the most recent year, aggregate both payroll and income taxes, and then take the people with the 400 highest incomes in the U.S., they average $270 million each — and of those, about 140 pay tax rates less than 15%, and about 30 pay less than 10%.
“I would say when we’re asking for shared sacrifice, and we’re making promises on Social Security … I’d make sure we [are] taxed in a way that’s commensurate with how we earned,” he says.
Buffett recognizes this isn’t a popular view in some corners. A later questioner, who has an 84-year-old relative who won’t invest in Berkshire because of Buffett’s tax-related activism, asked whether Berkshire’s stock would rise more if he were a less political figure. Buffett dismissed the impact of his politics on the company’s share prices.
“It’s fine if people disagree with us,” Buffett says. “It sounds to me that if that 84-year-old man is making a decision on his investment based upon his politics, he belongs on Fox.”
As for the economy, Buffett says we’ve seen worse times: “I bought my first stock in June of 1942. We were losing the war, and stocks were cheap.” The message? Macroeconomic factors shouldn’t replace sound thinking about value, competition, and so forth when it comes to the business of investing.
3. On stock buybacks, dividends, and whether Berkshire is undervalued. Buffett says his aim is not to advertise the attractiveness of his company’s stock. Nevertheless, he and Munger both see it as worth “significantly” more than it is trading for right now.
So why haven’t they repurchased more stock recently? There’s no reason to act quickly, Buffett says. What’s more, he notes, it’s easy to be dumb about repurchasing shares. Too often, CEOs choose to pursue buybacks for reasons other than price.
Buffett says he won’t do that.
Moreover, he views himself as a fiduciary for thousands of investors, and in that role, he believes paying dividends isn’t the best use of Berkshire’s cash: “I do not think a dividend would be a plus in terms of getting the share price up to [fair] value — in fact, it might be quite the opposite.”
4. On the market and stocks versus gold. Buffett says his teacher, the legendary value investor Benjamin Graham, created the simplest formula for obtaining wealth. All anyone has to do is read chapters 8 and 20 of The Intelligent Investor, in which Graham likens investing in stocks to bargaining with a crazy person — or, to use Buffett’s particular parlance, “a psychotic drunk.”
“The beauty of stocks is they do sell at silly prices sometimes,” Buffett says. “That’s how Charlie and I got rich.” But he’s being modest. Buffett isn’t just rich; he’s Scrooge McDuck rich.
According to Forbes, at a net worth of $44 billion, he’s the world’s third wealthiest person. Carlos Slim Helu, the man behind Latin American telecom America Movil (AMOV), ranks first with a $69 billion fortune, while Microsoft’s (MSFT) Bill Gates, a Berkshire director (and in attendance at the annual meeting) is second with $61 billion.
And what of gold, which has become a popular alternative to investing in stocks? “When we took over Berkshire, gold was at $20, and Berkshire was at $15,” Buffett says. “Gold is now at $1,600 and Berkshire is $120,000.” He went on to say he would “bet his life” that Berkshire shares will outperform gold over the long run, and he says the same about stocks generally.
Do you own shares of Berkshire Hathaway? What’s the most interesting thing you’ve heard Buffett and Munger say today or during earlier meetings? Let us know in the comments section.
Fool contributor Tim Beyers owned shares of Berkshire Hathaway and Google at the time of publication. The Motley Fool owns shares of Microsoft, Google, and Berkshire Hathaway. Motley Fool newsletter services have recommended buying shares of Berkshire Hathaway, Google, and Microsoft, and creating a bull call spread position in Microsoft.