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Berkshire Hathaway AGM 2023 Insights: Future Investing Opportunities

Warren Buffett, CEO of Berkshire Hathaway and perhaps the greatest investor of all time, recently hosted the Berkshire Hathaway Annual Shareholder Meeting with fellow legendary investor and long-time business partner Charlie Munger. In this episode I react to highlights about how they are thinking about future investing opportunities for us and for Berkshire; one investor is more optimistic than the other.

Related episodes:

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Berkshire AGM 2023 Highlights: Warren Buffett on Elon, EVs, Apple

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Howard Marks Says Historic Stock Market Sea Change Has Begun


(00:00) hi JJ here with the outer value welcome well today we’re going to look at Warren Buffett and Charlie Munger again from the Berkshire Hathaway annual general meeting where they had tens of thousands of people attend as they do every year so they have a long q a six hour q a session and I’ve pulled some highlights from that I’ve already made one video about this reacting to some of what they said and this time it’s about opportunities the opportunities they see ahead for Berkshire and by extension for

(00:28) us as small investors because he does talk about that Warren Buffett does talk about that so let’s get into what they say about the opportunities and investing that they see in the years ahead I think value investors are going to have a harder time now that there’s so many of them competing first a diminished bunch of opportunities so my advice to Value investors is to get used to making less get used to making less it makes the point there that there are a lot more value investors that it used to be perhaps

(00:59) because of the fame of these two Warren Buffett and Charlie Munger I mean there’s about 50 000 people in that arena there 50 000 as you assume it would be value investors and it’s true that value investing has become more popular even though the returns haven’t been so great say over the last decade or so last couple of years they have it’s sort of making a comeback a growth investing took over but he’s being a little bit pessimistic there saying that get used to making making less there

(01:28) have been other investors who’ve said that the next decade won’t be so great for the stock market like Stan druckenmiller I made a video about about what he’s saying recently and I’ll put a link in the description to that where he’s he he said he wouldn’t be surprised for the stock markets the same place as it is now or a few months ago in 10 years time so and and there are other ones like Howard Howard Marx think we’re back to normal we’re not in a huge bull market so Charlie Munger thinks get used

(01:58) to not making as much going forward what does Warren Buffett have to say about that Charlie was been telling me the same thing the whole time we’ve known each other we we get along wonderfully because we are making less oh well but that’s because that mostly I think is because it’s larger when we were younger we never thought we could manage 508 billion no one or five yeah but I I would argue that uh buff is making the point there that they’re making less which they are over time they’ve still

(02:30) got a compounding annual compounding rate of over 19 over more than 55 years it is now that they’ve been running money but if it makes the point that if you’ve got if you’ve got less money to deal with if you can make higher returns I mean they the bigger the amount of money dealing with 500 billion as you said pool of opportunities is a lot smaller they’ve only really gone like 30 to 40 companies to choose from you notice that the big bets they make are on the huge mega cap large cap companies

(03:00) because they have to do that it’s not going to move the needle if they if they invest in a small cap or even a medium cap or even a some of the large caps they just need they need these big deals on big companies they have to buy 100 of a company and still wouldn’t move the needle it’s just a mathematical thing about the bigger the size of the wallet as Buffett says the lower the returns there’s gonna be plenty of opportunities and part of the reason they’re going to be plenty of opportunities the tech

(03:26) doesn’t make any difference or any of that I mean if you look at how the world changed in the in the years since 1942 when I started new things coming along don’t take away the opportunities what gives you opportunities is other people doing dumb things and uh what does he mean by other people doing dumb things I think he’s talking about psychology Market psychology psychology of investors who buy high sell low and value investors traditionally Buy Low and wait for it have that not making an emotional purchase it purchase at the

(04:03) wrong time don’t get firmer Etc let’s see what else he has to say I would say that well the 58 years we’ve been running Berkshire 58 I would say there’s been a great increase uh in the number of people doing dumb things and they do big dumb things and the reason they do it to some extent is because they they can get money from other people so much easier than when we started easy to get money investing to borrowing has disappeared so much from this huge capitalisting Market that anybody can play in but the big

(04:42) money is in selling other people ideas it isn’t outperforming it’s talking about fund managers here I think selling people things that aren’t a good good deal or that that aren’t a good Investments a lot of fund managers doing that I think if you don’t run too much money which we do but if you’re running small amounts of money I think I think the opportunities will be greater but then Charlie and I have always differed on this subject he he likes to tell me how gloomy the world is and I I like to tell them we’ll find

(05:13) something and and so far we’ve all been kind of right so there he talks about if you’re having small amounts of money you can do better in the market and back in his early years when he was running Millions rather than hundreds of billions he did very well he had 50 years compounding when he was running a fund and he’s he said that he could almost guarantee that if he was running a lot less money because there are many more opportunities that the crowd isn’t going for he doesn’t have to go for Mega Caps

(05:41) or whatever it could go for this small out of the way companies where he analyzes and does very well that’s what he did so it’s a different situation sometimes to get criticized especially by I’ve seen retail investors growth investors during this last exuberant phase criticized them for not putting more money to work but the fact is they have to find those big deals of big companies and they have to be a good price so they’re willing to wait and that’s the situation they’re in now with

(06:03) running hundreds of billions of dollars he does say at one point that they can they could buy something a company worth 50 60 up to 100 billion dollars but those deals just don’t come along very often at a good price we could budget Niche on that or not no there’s there is so much money now in the hands of so many smart people all trying to outsmart one another and not promote one another getting more money out of other people and it’s a radically different world from the world we started in and I suppose it will have its

(06:45) opportunities that’s also can I have some unpleasant episodes but they’re trying to outsmart each other in arenas that you don’t have to play I mean not to stop him there what he’s saying was you don’t have to play in the Arenas that other people are the big the fund managers you don’t have to buy these Mega cap stocks Joe Greenblatt was another person another investor who started in special situations in smaller companies and did incredibly well the same way he kind of followed Buffett

(07:15) Buffett’s early years and he wrote a book about the special situations and the these things that he found he was very concentrated in five to seven companies stocks entered very well and that’s what Buffett’s talking about there are opportunities where where other people aren’t playing we don’t have to compete against all these smart people trying to find these opportunities that’s the point he’s making I think it’s a really good one it’s part of the reason why I’m more

(07:38) into small caps these days sometimes medium but mostly smaller under a billion dollars again that’s looking for Quality Compounders over time I mean there’s more risk involved in very small companies but there there’s potentially higher reward really if you look at if something that’s 50 billion dollars or up is it really going to 10x is it really going to 100x when no company’s ever ever got there got that far I mean they can in the future because of inflation and so forth but really he’s

(08:09) talking about there are more opportunities if you have a small amount of money that’s where retail investors in particular actually can have an advantage over fund managers at managing billions by the way if you’re watching on YouTube and getting value out of this video so far please hit that like button to help to spread it to more people thanks the world is overwhelmingly short-term focused and if you go to an investor relations call they’re all trying to figure out how to fill out a sheet to show the earnings for the year

(08:40) and the management is interested in feeding them expectations that will slightly be beaten I mean that because the world was made no order for anybody that’s trying to think about what you do that should work over five or ten or twenty years over and over again in this amazing buffets talked about he’s brought up I don’t know what this company is going to look like I don’t know what this industry is going to look like in five or ten years and he said that I do think I know what apple is going to look like in five to ten years

(09:07) so he’s very long term thinking always thinking long term do I know what this opportunity is five or ten years down the line not next year or the next quarter even but long term I would love to be born today and go out with not too much money and hopefully turn it into a lot of money but and Charlie would too actually just he would find something to do I will just guarantee you uh and it wouldn’t be exactly the same as before but he would have a big big pile I would not like the thrill of losing my big pile into a small fight

(09:48) but we like my big piles is the Way It Is Well I like we do stream love of the big vial so I’d love to know your thoughts what do you think about the opportunities for investing in the coming years do you think Warren and Charlie are right which one’s right they both have quite different views on that with uh Charlie being a little bit more pessimistic and we’re not so much but not so pessimistic if you have small amounts of money so what do you think where do you think the opportunities are best in the in the

(10:21) coming years what do you think the stock market’s going to do we just don’t know but what do you think let me know in the comments thanks okay now there’s more on opportunities what they see for Berkshire and their huge cash pile the opportunities that they see ahead even in the position there they’re in with a huge huge Investments and huge amounts of capital to invest but only when they’re opportunities what are they like so this is what they had to say about that and the question at the 2010

(10:43) Berkshire annual meeting you said the one question that you would ask of the Berkshire CEO would be about the distribution of cash to shareholders as the Berkshire cash pile grows larger and larger so let me ask that question do you still feel confident of the future prospects for our over 100 billion dollars in cash on hand or are we getting closer to cash distributions I’m Rebellion Berkshire sharers are selling for less than we think they’re worth that’s a pretty that could be a pretty big way to distribute cash the the but

(11:17) we’d rather what we really like to do is buy great businesses if we could buy a company for 50 billion or 75 billion uh 100 billion and there are just talking there what are you saying about BuyBacks that’s one way if they don’t see good deals around they can buy back their own shares if the price is right and the over the last few years they have seen that the price was right uh below what has their surah’s intrinsic values that they only do BuyBacks when they see that the company’s trading for

(11:45) less than what they’ve worked out to be intrinsic value which has not an exact figure but I’m sure they do they both do it and then they know after so many years of running Berkshire exactly well not exactly about around about what it’s worth but they think it’s worth so they buy back their own shares you know that that’s just like a good investment in their own company and as he said but they prefer to have Acquisitions and they could have some big Acquisitions but there aren’t just those that number

(12:12) of opportunities around not very often at the right place let’s see what else he has to say about that we could do it and we can do it and our words good it’s difficult with a public company because in effect if you’ve been on a company you make the bid and they’re sure owners vote months later and that you’re giving it an option if we’re good for it and the other guy has a way to talk to you stop you or all kinds of things they can get out of it and you get paid two percent for that or

(12:40) one percent for that that that is not an appropriate price sengpong public companies big public companies a lot to more difficult than private so they prefer to do this is the problem of having so much money that they can’t necessarily get a good deal or don’t come along that’s too competitive when they you know because they could buy a hundred billion dollar company if they want to that’s what he said that’s a massive company to buy they tend to buy small percentages of big companies and

(13:04) increase it over time but they said they could do a deal for the 100 of some company the easier to do with a private company and and there aren’t very many that are big on the other hand there aren’t very there’s nobody else that can quite make a deal like we can under certain under the right circumstances and there could be a situation where a bunch of very a number of very decent companies I’ve got a very uncomfortable borrowing structure and money comes due due to them at the exact wrong time and that’s when they pick up

(13:38) a phone as did Tiffany and Harley Davidson and you name it I mean a whole bunch of companies in 2008 he’s talking about when they say there’s an economic crisis they kind of like that because uh companies that have taken on too much debt or whatever it is they can can pay back what they’ve borrowed and they get into distress and that’s they pick up the phone to Berkshire because they know Berkshire could buy them out sort of instantly they’ve uh Buffett’s well known they’re well known for making a decision within

(14:06) a within a few days within a few hours even and just have the money they’re ready to go ready and waiting to pounce on those good opportunities but they don’t come along very often like the 2008 financial crisis was one and so that that’s the time that they really actually like to buy that sort of thing will happen again whether well the results and us getting the calls or what the world is exactly at that time but the one thing we know is that that the number of phone calls that you can make at a time like that

(14:36) is very very limited and there can be good companies they don’t want to sell the company necessarily but they may want they just may need five or ten or Twenty billion dollars depending on what company you’re talking about so they’re saying they’re asking for money but in the stress asking for money and so Berkshire gets very good terms that’s how they get really good deals at the time when other companies are in distress and books is a fortress with huge amounts of cash ready to invest in companies when they need it

(15:04) can happen and our own shareholders can be selling the stock too cheap and we’ll never do anything to make them subtle cheap and we’ll tell them the truth about what the business is but if Market circumstances result in us being able to buy in 50 billion of our own stock will buy it I’ve heard him say that before too a few years ago I think it was 2020 2021 he was basically saying that we’re when they’re buying back he said he just said that he wouldn’t advise any shareholders to sell but if you do we’re

(15:29) happy to to buy those shares off you pretty much Warren Buffett saying that the shares are cheap and we’ll buy them off you if you’re stupid enough to sell them or you have to sell them because that’s what sometimes in financial crisis people sell for many reasons we’ll see what the world holds we don’t have the opportunities we used to have but we’ve got we’ve got enough and and we’re making money with what the things we have it isn’t killing a stall of 100 1230 billion of of uh 155 bills at five

(16:02) percent plus Bond equivalent yields and everybody says well yields are going to get out of the future I don’t have a faintest idea no cash at the moment you know the prime rate was 21.5 in 19. 81 or two and people were worried that it was going to go totally out it’s been out of control and bulker kept it from happening but if Volker hadn’t been in there who the hell knows what would happen but uh so we’re running Berkshire so that uh we’ll do okay and maybe we’ll do a little bit better than okay what it means by we’re

(16:33) doing okay and we’ll do a little bit better than okay the aim is to beat the market beat the S P 500 which is the market Benchmark so on average that’s been about nine percent I think over a long period of time so that’s really what they’re trying to do to continue to beat the market they don’t really have much hope of getting like 30 40 50 or maybe in a in a good year not but maybe not 50 but they with just with so many Investments they’re having so much money but they they’re just having to beat the

(17:00) market and of course it’s it’s probably likely that they will do that and there’s a bubble or an exuberant Market that’s when Berkshire tends to underperform and then after the inevitable crash after that is when they kind of catch up and overtake others who get into trouble as I said at the beginning I’ve made a previous video about this year’s Berkshire AGM with Warren and Charlie their q a where they talked about Elon Musk about EVS about their big steak in apple the opportunity and criticism they got for that and so

(17:28) if you want to go and see that if you haven’t seen that already go here and I’ll put a link in the description as well for those on other platforms thanks for watching and listening to this one and I’ll see you next time

Disclaimer: I am not a financial adviser. This content is for education and entertainment purposes only. Do your own analysis and/or seek professional financial advice before making any investment decision.

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