6 top takeaways from Warren Buffett’s latest Berkshire Hathaway meeting

Warren Buffett, arguably the world's most famous investor, addressed shareholders at Berkshire Hathaway’s annual shareholder meeting on Saturday in the US.

The investment conglomerate's holdings are widely regarded as a litmus test for the broader US economy. Its portfolio of businesses includes railroad, retail, construction, and energy firms, and it's being watched particularly closely during the current period of elevated inflation and interest rates.

1) Succession plan

This year's AGM was the first since the passing of Buffett’s former vice chairman and long-time friend Charlie Munger. The meeting’s traditional opening video focused on his late business partner. Munger died late last year aged 99.

Perhaps more mindful of his own mortality, the 93-year-old reminded the audience of his own succession plan.

“We’ll see how the next management plays the game out at Berkshire, [but] fortunately you don’t have too long to wait on that. I feel fine, but I know a little about actuarial tables,” Buffett said.

Buffett has already named Greg Abel, vice chairman of Berkshire’s non-insurance operations – who sat at his side during the presentation – as the firm’s next CEO.

2) Apple is still “wonderful”

Berkshire’s earnings rose despite Buffett’s warning in May last year that profits at most of its operations would fall in 2023 as an “incredible period” for the US economy ends.  On the earnings front, the first quarter of 2024 marked a 39% rise for Berkshire. Buffett emphasised operating earnings as the most descriptive way to view the company given it removes the short-term volatility of market fluctuations in net earnings.

A large contributor to this is Berkshire’s big stake in Apple (NASDAQ: AAPL), the fund’s top holding that, at its peak, comprised 50% of the portfolio (it's now closer to 40%). Apple’s stock rose a staggering 48% in 2023 as AI fervour lifted the tech sector. Buffett has been trimming this position since the December quarter, but he remains the largest individual investor in the consumer tech firm.

Despite offloading around US$100 million in shares, Buffett remains a keen backer of Apple and its management. He indicated it was “extremely likely” the firm will remain Berkshire’s largest holding at the end of this year.

Buffett also called out some of Berkshire’s other large positions – American Express (NYSE: AXP) and Coca Cola (NYSE: KO) – as “wonderful” businesses but highlighted Apple as even better.

3) US$189 billion - a new record cash holding

Topping the previous record set in the December quarter, the fund’s cash balance reflects Buffett’s view on market valuations currently. It also reflects a shortage of big-ticket deals that have caught Buffett’s eye. This is something he’s long noted, indicating the elevated interest rate environment also plays a part.

“We don’t use it now at 5.4% but we would if it was at 1% - don’t tell the Federal Reserve that,” Buffett said.

Elevated interest rates saw Berkshire’s interest earnings rise to US$1.9 billion in the March quarter, up from US$1.1 billion in the December quarter.

Buffett also noted the large cash pool, in an increasingly “complicated and intertwined" world allows Berkshire to step in when opportunities present themselves.

4) Buffett's cash book could hit US$200b by year-end

Given...

“We only swing at pitches we like…It isn’t like I’ve got a hunger strike going on, it’s just that things aren’t attractive. There are certain ways that could change, and we’ll see whether they do,” Buffett said.

“We’d love to spend it, but we won’t spend it unless we think we’re doing something that has very little risk and can make us a lot of money,” he told the crowd of thousands.

He projected this mountain of cash is set to grow larger still, indicating “it’s a fair assumption” it will hit US$200 billion by year-end.

Later in the meeting, Buffett said he’s hoping for “an occasional big opportunity” and suggested there’s an investment in Canada he’s currently eyeing.

5) The AI genie

During the five-hour meeting, Buffett fielded numerous questions from attendees on topics ranging from artificial intelligence (AI), to US debt, to who will win in the electric vehicle space and more.

Asked which business in his portfolio is at greatest risk given that the AI genie is now “out of the bottle,” Buffett indicated it was “anything that’s labour intensive.”

“AI can create an inordinate amount of leisure time, and what people do with that remains to be seen…AI is profound, that’s what makes it a genie,” he said.

6) “You have to be lucky”

Buffett was also asked what he believes is the secret to his legendary investing acumen, in a career spanning more than 60 years.

“You have to be just plain lucky,” Buffett said, indicating his longevity isn’t something he would’ve bet on when he was a younger man.

“My great skill has been avoiding bad luck…you should make the most of your luck when you get it – sometimes I’ve done that, sometimes I haven’t,” Buffett said.

And in wrapping up the Q&A portion of the meeting, he came back to his opening remarks about his own life: “I not only hope you come next year. I hope I come next year,” he said with a laugh.