Never Ever Bet Against America | Warren Buffett Berkshire Hathaway Annual Shareholders Meeting 2020
May 8, 2020
The “Oracle of Omaha” gave some incredible knowledge.
A couple days ago for the first time in Berkshire Hathaway’s history, the annual shareholder meeting took place via online transmission.
Warren Buffett spoke about the company’s earnings and losses while also giving some great investing advice.
Here are some of my favorite moments from the meeting.
- Farm Analogy
During the meeting Buffett spoke about how people should ignore what stock prices do during the day and explained it brilliantly by using an example of a farm owner.
Buffett explained that if an individual were to purchase a farm he/she would do so because they would see VALUE in it. Once you purchase the farm you find out you have a neighbor who has a strange habit.
Everyday the neighbor comes out and yells what he’s willing to pay for your farm. He does not care how well you or the farm are doing, he is just screaming what he thinks your farm is worth. At the same time your land is having great output but no matter how business is going the neighbor always comes to your fence and shouts what he thinks your assets are worth that day.
Just because your neighbor is willing to pay less than what your farm is worth doesn’t mean you’re going to sell it to him just to take the loss and “save” some money.
Stocks work exactly the same way.
When investing in companies people should decide to do so because they see value in the organization, not because the price is high or low. What really matters is how much value one is acquiring for the underlying price of the stock.
Basically for aspiring investors like myself we should ignore the daily quotes of companies because we should know what the real value of the company is. A successful company is one that has excellent core values and great products or services. It’s imperative to do appropriate research and understand the type of business one is looking to invest in before doing so.
2. “The American Miracle”
Buffett is commonly known for his patient approach to investing where he says years could go by before an adequate opportunity comes to hand.
However how has he managed to stay positive during some of the worst moments in country’s history?
Buffett believes the “American Miracle” is what has enabled Berkshire to become the conglomerate it is today. The true belief that America will find a way to move on and continue growing.
His thought has always been that people will get through and times will improve. The philosophy is acknowledging that there are going to be horrible events but it’s crucial to stay in the game, no matter what our old “farmer neighbor” friend says.
It was very inspiring to hear these words from Buffett himself and now reflecting about it, I realize it’s genius. The U.S is a world power and has immense influence in global events, so the fact that one is betting on the U.S when investing makes a lot of sense. If the country were to collapse and disband for some reason it would be difficult to believe that there are other governments around the world who could hold safe investments for the future like the U.S can.
In other words if America were to collapse it would be insanely difficult to find a nation who can guarantee rights to its people like the U.S does. That is why America is the land of opportunity, laws are applied and the system works better than in most countries, and that is why investing in American companies is “safer” to some extent.
3. Berkshire stock falling below 50%
During the meeting Buffett mentioned that in three separate occasions in the past, Berkshire stock had dropped below 50%. Without ending his statement I understood the message he wanted to get through to the people. If he would have sold his equity in the company just because the price dropped so radically, he wouldn’t be who he is today.
In society it seems like individuals do this a lot, making decisions based on fear. People see that the price of their assets go up and so they decide to sell and take a profit, not knowing that it could possibly be worth a lot more in the future. On the other hand when price goes down they sell out of panic just to save it all from going to zero, without realizing it could go back up exponentially as well. Also, just because the price went down does not mean you are losing money! You only take losses if you decide to sell when the price is down!
The point of investing as I see it is to invest for extended periods of time, owning a part of a business that I see incredible value in and that I am not afraid to own for over 10–20 years or more. That is how real wealth is made, playing the long game.
Closing Thoughts
Overall during this event I didn’t learn many new ideas because he just restates what he has said in previous occasions. Honestly there weren’t any new lessons because Buffett himself says it’s not that the difficult to do what he does and constantly repeats what one should do to acquire businesses. So here are a couple of thoughts gathered from the meeting:
- Making a lot of money is really simple.
It all comes down to saving as much money as you can in order to INVEST in the future. That’s literally it.
Just don’t invest in ventures you don’t understand.
2. Become an EXPERT at your profession.
If you become a master in your craft you will be able to earn a lot of money for your skills, meaning that you will have more resources to put into different assets in the future.
3. Emotions should never be a decisive factor to your investing decisions.
Buying and taking a profit or selling and taking the loss just because the price changed drastically over a couple of days is the easiest way of NOT achieving great fortunes. Just because everyone around you is acting and taking decisions based on fear or greed doesn’t mean you should to. Be considerate, think about underlying value and production before making major decisions.
4. Be Patient
Time should be our best ally, better moments will come, it comes down to how much faith we have in the country. The greatest businesses took decades to become what they are today and to earn the reputation they have. It is only logical to believe that in order to become extremely wealthy it will take time as well.
Lastly, it is only reasonable for me to say I am not an advisor of any sort, but I do believe that by following what Buffett says, we can obtain incredible riches.
I’m sure the following quote has been thrown out a lot in the past, specially recently. Despite this, it truly has made a lot of sense in the past and will continue to do so in the future.
“Be fearful when others are greedy and be greedy when others are fearful.” -Warren Buffett.