Renowned investor Warren Buffett remains optimistic that there would be plenty of investment opportunities despite the changes the world was seeing but struck a note of caution on US banks in light of the recent failures of Silicon Valley Bank, Signature Bank and First Republic Bank.
At the Berkshire Hathaway’s shareholder meeting in Omaha on Saturday, often called ‘Woodstock for Capitalists’, thousands gathered to listen to Buffett, 92, and his right-hand man Charlie Munger, 99.
Buffett said the big money today was in selling other people ideas, and not in outperforming. “Charlie and I have both differed on this subject. He likes to tell me how gloomy the world is. And I tell him we’ll find something. And so far we have both been kind of right,” he said.
Also read: Bill Gates to Warren Buffett: Celebs who won’t leave their kids an inheritance
Berkshire Hathaway‘s first quarter net profit rose to $35.5 billion, with the firm’s cash pile topping $130 billion.
“The world is overwhelmingly short-term focused. And if you go to an investor relations call, the management is interested in feeding expectations that will slightly be beaten,” Buffett said. “I’d love to be born today and go out with not too much money and hopefully turn it into a lot of money.”
His oft-repeated Buffetisms like “Rule no 1: Never lose money. Rule No 2: Never forget rule No 1” and “Our favourite holding period is forever” revolve around the concept of value investing, a strategy of selecting stocks that trade for less than their intrinsic values. Value investors seek to invest in stocks of companies which they believe the market has undervalued.
Munger, however, cautioned that value investors may have a harder time now competing for a diminished bunch of opportunities.
“My advice to value investors is to get used to making less,” said Munger. “There’s so much money now in the hands of so many smart people and they are trying to get more money out of other people. It’s a radically different world from the one we started in. There will be opportunities but there will also be unpleasant consequences.”
On the US banks, in the light of the recent events, Buffett said, “Events will determine the future (for banks). You got politicians and a whole lot of people involved who don’t really understand the system. And the American people are as confused about banking as ever and that has consequences. Nobody knows what the consequences are because every event is recreating a different dynamic. So we’re very cautious in a situation like this about ownership. We do remain with one bank holding.” He said he doesn’t expect the US dollar to be dethroned as the world’s reserve currency any time soon.
Munger and Buffett were sceptical about the future of the automobile industry five or 10 years from now. “Electric vehicles coming into the market is an interesting development. At the moment it is imposing huge capital costs and huge risks. And I don’t like huge capital cost and huge risks,” said Munger.
Also read: Warren Buffett AGM 2023 Highlights: Buffett, Munger answer queries on Q1 results, banking, AI at annual meeting
Munger said the world would see a lot more of robotics in action but was sceptical around some of the hype surrounding artificial intelligence. “I think old fashioned intelligence works pretty well,” he said.
Buffett praised Apple, whose chief executive Tim Cook was one of the attendees at the meet. “It just happens to be a better business than any we own,” said Buffett, who was slated to receive $859 million in dividends this year from Apple as one of its largest shareholders.