Billionaire investor Warren Buffett hosted the Berkshire Hathaway (BRK.A) annual shareholders meeting on Saturday, May 6, 2023 in Omaha, Nebraska. During the wide-ranging Q&A sessions, Buffett, the company’s CEO and Chairman, and Vice Chairman Charlie Munger answered questions from shareholders about the overall health of the economy, inflation, the regional bank crisis and artificial intelligence.
The annual shareholders meeting took place just days after the Federal Reserve raised interest rates by 0.25% to a new 16-year high above 5% .
00:02:43 breakdown of Buffett’s comments on banking
00:04:00 analyzing what Buffett and Munger said on AI
00:05:54 what Buffett and Munger said about “value investing”
BRIAN SOZZI: Welcome to Yahoo Finance's special coverage of the 2023 Berkshire Hathaway Annual Shareholders Meeting, known as the Woodstock of capitalism. And it's among the biggest events of the year for investors. We'll hear from legendary investor and Berkshire Hathaway Chairman and CEO Warren Buffett, along with his Vice Chairman Charlie Munger, as they give us their unique take on what's been a complicated year for the markets.
A banking crisis, a slowing economy, geopolitical tensions, accelerated digital transformation with AI and a lot more, it's all on the agenda today. We're breaking down the big news from today's meeting and what's happening to the markets and your money.
Brian Sozzi of Yahoo Finance here with Yahoo Finance's head of news, Myles Udland. And Myles and I, along with all of these people, are streaming out of the CHI Health Center in Omaha, Nebraska, have been ingesting hours and hours of Warren Buffett's insights into the economy and stocks alongside his right-hand man, Vice Chair Charlie Munger. And of course, we have a lot of takeaways.
But let's start with three from this really celebration of capitalism, as those Berkshire shareholders love to call it. First off, the big banks, everybody in this room was waiting, Myles, to hear from Buffett on his views on the banks. Of course, First Republic now owned by JP Morgan, Buffett really not disappointing. Out of all the bank stocks that he talked about and the sector itself, he said he liked Bank of America, which he owns 13% of.
MYLES UDLAND: Yeah, well, so he came through his prepared remarks, which he said will be brief. They ran about 18 minutes, which I guess for Buffett--
BRIAN SOZZI: That's brief.
MYLES UDLAND: --counts as brief. And we kind of got right into it with the regional banks. And really the question was, what would have happened had the deposits of Silicon Valley Bank not been insured, and ultimately Buffett going with what I think most people would have expected him to say, where he said it would have been catastrophic.
And I think, you know, Sozzi, it brings me back to that weekend where the bank is seized by regulators Friday morning. And everyone's thinking what's going to happen over the weekend. Ultimately FDIC comes out. They say we're going to backstop these.
And throughout the proceedings there were a couple of questions in this direction. And I think Buffett's takeaway is that effectively all deposits in the US are now backstopped.
BRIAN SOZZI: That's good.
MYLES UDLAND: Whether they say that or not.
BRIAN SOZZI: That's good. And that, of course, as well, Myles, as well, but come Monday morning's open for the market--
MYLES UDLAND: Yeah.
BRIAN SOZZI: I didn't get the sense that Buffett signaled to the world, go out and buy bank stocks. He sounded like many other people are, yeah, they might do this. They might do that. But I didn't hear that same tone compared to what I heard from Jane Fraser, CEO of Citigroup, a couple of days at Milken, where she said things are stable. I just didn't get that vibe.
MYLES UDLAND: Yeah, I mean, we'll get to it in a little bit with his comments on Bank of America in more detail. But he did say that if you are an investor in banks right now or a prospective investor, I think he said, if you're a bank shareholder to use his phrase exactly, kind of hard to know what you buy, or what you're owning I guess in that situation. And a lot of it for him has to go with what are deposits.
And he mentioned how sticky are deposits now, because did the whole wind-up. You don't have to stand in line to take him out of a bank. You can just go on your phone and pull your money. Obviously a dynamic that we saw with the Fed's report and the FDIC's report a couple of weeks ago is what happened at Silicon Valley Bank.
What has been happening in the sector is people are wondering who is next. But really I think from Buffett's view, there's just a perception right now that you do not know for sure for sure what the business of a bank exactly looks like.
BRIAN SOZZI: And, you know, you mentioned Bank of America, Myles, and you're a student of Warren Buffett and this meeting, been coming to it for many years. I can't say I'm surprised that he called out Bank of America. Of course he owns 13% of it. But under CEO Brian Moynihan, they aren't necessarily out there taking these crazy risks that a lot of these other regional banks are. So a different company, but again, Buffett, being Buffett, suggesting that Bank of America is doing something right in this climate.
MYLES UDLAND: Yeah, and ultimately I think his takeaway was, well, I bought the thing back in 2011. He puts a bunch of capital in it. And I guess I'm going to see that through 12 years later.
BRIAN SOZZI: Yep, absolutely. All right, well, outside the bank, of course, another takeaway we have is AI. So everybody was focused on what Buffett and Munger had to say on banks, but also artificial intelligence. And again, I'm going back. I'm thinking through the stock action on Monday. I just don't think these AI stocks, which have been really hot, come out blasting off of what Warren Buffett said out of the gate here.
MYLES UDLAND: I mean sure, if you're trying to play the AI stocks--
BRIAN SOZZI: I'm trying to, I'm trying.
MYLES UDLAND: Based on what Warren Buffett is going to do, I mean, I don't really know if I can help you with that. But I think that the AI interaction there, and that was, I think, question two, three, four. It was right up there on the proceedings. It really got us our first great Mungerism of the day, when you're talking about what's the power of AI, this, that, and the other. And of course Charlie hits us with, well, I think old fashioned intelligence works just fine. We don't need the artificial stuff.
BRIAN SOZZI: There's nothing wrong with that.
MYLES UDLAND: The good old fashioned intelligence is just fine in his view.
BRIAN SOZZI: But it is interesting that they view AI, they first went to BYD robots. Of course BYD is that electric car company. That's their first interpretation of what AI is, not Microsoft.
MYLES UDLAND: Yeah.
BRIAN SOZZI: Buffett and that Bill Gates relationship, not what they're doing, robots making cars.
MYLES UDLAND: And I think that the reason that people come to this event, and the reason that Warren and Charlie have an audience, is because they are representative in a lot of ways of the median investor's view on this. And sure, you talked a lot of people who get really excited about language learning models and all these kinds of AGI, right? It's not just AI. It's artificial general intelligence.
And they're just like, I mean, we have robots, you know. Robots are fine. And also in this section, too, I think it's the first time of many times where we got to what if he references to nuclear weapons.
BRIAN SOZZI: Yes.
MYLES UDLAND: And the technology--
BRIAN SOZZI: Which he always does, which he does in the past.
MYLES UDLAND: Is a regular feature of these. But I think that the risk of-- like the nuclear risk to Buffett is sort of the go to zero risk. And obviously in the '60s, very formative time in his career, and it's something that he brings up quite a bit.
BRIAN SOZZI: So bottom line with that takeaway, folks, is if you were looking for Warren Buffett to pitch shares of C3AI, not going to happen. Next take away, of course, value investing. That's why a lot of people that I've talked to at this event, that's why they come here, to get a sense of what Warren Buffett sees in terms of value. And it was interesting what he said on value investing, Myles.
MYLES UDLAND: Yeah, and, you know, I think this is where we saw the biggest distance between Warren and Charlie. Charlie Munger, very pessimistic on it, he said, I just think it's going to be worse in the future. And Buffett coming back and saying, well, you know, Charlie, you always say that.
And I think that to use Munger's exact quote, my advice to value investors is get used to making less money. And you see the folks kind of behind us here certainly this morning teeming into the building, you know, people in sport coats and khakis, value types. I overheard quite a few conversations on my way in to that effect.
And they weren't just trying to give some encouragement to the crowd. And this is where we kind of got to a Warren zinger, perhaps, where your biggest opportunity as an investor, value or otherwise, is other people doing dumb things.
BRIAN SOZZI: Yeah, a lot of folks mistaking me for a hedge fund manager at this event. I also point out--
MYLES UDLAND: Well, you're dressed like one.
BRIAN SOZZI: I know.
MYLES UDLAND: I'm dressed like a normal person. You're dressed like a hedge fund manager.
BRIAN SOZZI: I know. Well, I also, on value investing, I caught up with Whitney Tilson, longtime Buffett follower and friend of our shows. He said based on his models, he said this after the event, he calculates that Berkshire is trading at a 13% discount to intrinsic value. So if value investing is really dead, what do you do with Berkshire stock if it is that undervalued?
MYLES UDLAND: Yeah, well, what did Warren say? $504 billion on a GAAP basis is what the stock is worth? And you kind of, or I think it's $504,000 per share. You do the quick and dirty math on that, divided by the 1,500, you get 333 for B shares, and I think they closed around 320 on Friday.
BRIAN SOZZI: All right.
MYLES UDLAND: So, I mean, Whitney always-- I've been in many presentations at this event with Whitney telling me that I should be buying Berkshire Hathaway. So I don't think you're going to get a different answer from him at other points in time.
BRIAN SOZZI: Fair enough. All right, of course, we have a rapid-fire section for you as well, hitting a lot of these favorite Yahoo Finance tickers. First off Apple, of course, Apple is a key holder, a key holding inside of Berkshire Hathaway. And Myles, naturally, it took a little while to get that Apple question. But it was interesting how it was posed to him.
MYLES UDLAND: It did, and we kind of got to it in two ways. I think what'll draw the headlines is Buffett saying, you know, I don't understand the product at all, or I don't understand the phone. But I understand the business. He understands the business of selling phones, not necessarily how one makes a phone.
But that also got into really what I think Apple has become the most instructive holding within Berkshire's portfolio. They pay a huge dividend. So every quarter, they're getting hundreds of millions-- they're getting $100 million check, or it's not, it's much larger than that. But nine figure check coming to Berkshire Hathaway.
Second thing, they buy back a lot of stock. So Berkshire's holdings in Apple, its percentage of the company that it owns, has gone up organically over time. We saw the announcement on Thursday night from Apple increasing the size of that buyback authorization.
So it's going to continue to go up. And it led to this discussion of how much Apple do you really own. And you look at the equity portfolio, it's out 40%. And Buffett was like, it's not 40%. We own a bunch of other stuff, See's Candies, Garanimals, got tons of runs in a kid's clothing brand. Tons of run today. But basically being like we're not 35% Apple, because our equity holdings are only a small chunk of the whole Berkshire family.
BRIAN SOZZI: You look at Apple and you have to think, is this the new Coca-Cola for this generation in terms of an investment for Warren Buffett. Is this Warren Buffett connecting with that next generation of investors?
MYLES UDLAND: I mean, I think, look, you can kind of say, and Buffett would probably say this, doesn't really matter what the product is. They have a dominant position in the market. They make a ton of money. They return a bunch of that money to shareholders.
So whether you're selling Coca-Cola or you're selling iPhones, it hits all those criteria. And whatever generation you want to call any company, any company coming from, Buffett's going to like those characteristics.
BRIAN SOZZI: Next up rapid-fire session here, Paramount. Of course, on Friday the stock got absolutely slaughtered, slashing its dividend, bad quarter, lots of losses. And one thing that stuck with me from that quarter from Paramount, Myles, when I talked to Amex's CEO, Stephen Squeri, that story is on our homepage now. He says do not surprise Warren Buffett.
To me he sounded surprised this event. He did not come out and say, you know, Bob Bakish is a phenomenal manager. Of course that's the CEO of Paramount. He didn't do it. He didn't do it.
MYLES UDLAND: Well, we just talked about how Warren Buffett likes companies that return a lot of capital to shareholders. What did Paramount come out and do on Thursday? They cut their dividend. And Buffett says never good when a company announces a material cut to their dividend.
You're trying to shore up your capital position. You can't give it back to your owners basically. So I'll be interested to see what happens with that position. It kind of is a small part of the Berkshire equity portfolio, kind of came up-- I won't say out of nowhere, he has a long history investing in the media business, but all of a sudden it's a bunch of Paramount. Now he owns 93 million shares of the company.
And so we get into the conversation about the streaming wars. And I thought his comments on your eyeballs were quite hilarious.
BRIAN SOZZI: Yeah, eyeballs matter, but in that--
MYLES UDLAND: He goes everyone loves to use their eyes.
BRIAN SOZZI: No, yes, and that's key, he's clearly bullish eyes. But in that context, there's a lot of competition for our eyeballs, which is why I think that stake in Paramount disclosed in November last year raised a lot of eyebrows, because it wasn't really Warren Buffetty.
MYLES UDLAND: I think everyone thinks the same thing, and, you know, look, the 13F will come out, I guess what, middle of next week, what they did or didn't do in the first quarter. So I think some questions there with that position.
BRIAN SOZZI: We're keeping it moving here, Taiwan Semiconductor, a position that Buffett took, what was it, late last year. And then he exited very quickly, not a very Warren Buffett type of move. But he did heap a lot of praise on that company.
MYLES UDLAND: Yeah, I mean, I'll kick this one right back to you, because you wrote up a quick story for us on this one. He heaped a lot of praise on it. And he kind of had a weird-- I don't know, I couldn't make sense of exactly what the point was on not wanting exposure to Taiwan, but saying US-China relations might be fine. Everyone has blame. I couldn't quite sort that one out.
BRIAN SOZZI: Yeah, and if you're an Intel and you're a lot of these other chip-makers, to not hear Warren Buffett say you're doing cool stuff, not exactly a great thing. Lastly, Occidental Petroleum. Of course, a lot of investors, Warren Buffett built its position or his position in Occidental Petroleum under the potential, maybe goes out and just buys the darn company. But Warren said, eh-eh, unlikely to happen.
MYLES UDLAND: He was very blunt. We are not going to make a play to take control of the company. They have approval to buy up to 50% of the outstanding shares. I think they own about 25% today. But, yeah, there was an analyst that talked to our RNS friend Josh Schafer last week who surmised maybe Vicki Hollub, CEO, would come in and run Berkshire Hathaway Energy when Greg Abel moves on. I mean, maybe that could happen.
BRIAN SOZZI: Ooh, that's good.
MYLES UDLAND: Yeah, it was a good one in the story. But Buffett kind of squashing that today.
BRIAN SOZZI: And then final takeaways, Myles, to you. You first.
MYLES UDLAND: Really crowded, man, this place is crowded. This place yesterday, extremely stressful going in the Convention Hall.
BRIAN SOZZI: For me, two takeaways, one amazing to see Warren Buffett, 92 years old, Charlie Munger 99 years old, answering all these questions in top form. I'm just fascinated by the whole thing. And the next, last but not least, on Monday, the "Morning Brief" newsletter, please do check that out, subscribe, whatever. We're looking into the succession battle, or not battle, or succession plan here for Warren Buffett at Berkshire Hathaway. Lots of interesting nuggets that our team pulled here from the event.
But that's it for yours truly and Myles Udland. And we're going to get back and get some air conditioning. It's a little warm here in Omaha, Nebraska. We'll see you guys later.