Saturday, May 3, 2025
Years ago, I sat down with Charlie Munger for a private lunch in Omaha; it was a priceless experience, and we’ll never forget it. It was a special day with a legend, all laid out in our latest book, When Markets Speak.
Today, our trusted Bear Traps Report associate, Chris Davis, is there.
NY Times Best Selling Author, Larry McDonald
Live From Omaha, Nebraska.
Today, HVP’s Marino Patrk and Christopher Davis attended the Berkshire-Hathaway Annual Meeting in Omaha, NE, and have been in town since Thursday. They attended conferences held by Gabelli Asset Management and Columbia Business School’s Heilbrunn Center for Graham & Dodd Investing and visited the over 20,000-square-foot exhibition of products and services that bring the sprawling conglomerate to life.
Throughout the meeting, Mr. Buffett returned to the phrase “turn every page” as an investor on the hunt for ideas and knowledge. It was not until the very last page, however, that Mr. Buffett made his big announcement—that he would advise the Board of Directors to have Mr. Greg Abel succeed him as CEO at the conclusion of this year.
At nearly 95 years of age, Buffett’s record as the greatest investor of all time stands firm. His recall of both current events and those 60-70 years ago was incredibly strong throughout the over 4 hours of question and answer. Buffett’s commonsense approach to investing, policy, and living has been a timeless draw for shareholders from all over the world. It was the late Charlie Munger who let slip a few years ago in a meeting that “Greg would preserve the culture,” and in subsequent meetings, it became more and more apparent that the leadership transition had happened without fanfare and under our noses. Buffett’s comments today also affirmed his support of Abel in that he plans to keep every share he has in the business. He qualified that it was an economic decision, “because I think the prospects of Berkshire will be better under Greg’s management than mine.” A truly breathtaking statement from the man who turned a failing New England textile mill into a trillion-dollar business, hitting all-time highs in price with Friday’s close.
Berkshire-Hathaway is a cornerstone holding across all strategies and portfolios at Hudson Value Partners. Mr. Buffett’s 60 years of stewardship have been nothing short of exceptional. Like him, we have confidence in Mr. Abel and all of Berkshire’s managers to navigate the challenges and opportunities of the decades ahead with the same discipline, ingenuity, and integrity that have benefited Berkshire-Hathaway shareholders for 6 decades.
Below we will share the top 5 ideas that came up in our conversations as a firm, at conferences, and with investors from around the world from the past few days in Omaha:
1) Berkshire may ultimately repurchase Mr. Buffett’s shares after his estate donates them to charity
- Christopher Davis first shared this idea in his post-meeting letter in May 2024. Sitting in the stands, it struck him at last year’s meeting how many times Buffett returned to how hard it is buyback large blocks of Berkshire stock and how much he likes seeing the wealth that Berkshire has created being given back to society. We believe HVP was the first (or among the first) to go public with this idea in an interview live from the NYSE on Schwab Network on September 30, 2024 (video).
- The “big buyback” is an idea now a part of the conversation and calculus for many shareholders.
2) A needle moving acquisition for Berkshire might have to be done with stock, not cash!
- While the firm has over $340 billion in cash, sellers of truly large, needle-moving businesses may not want the tax impact of selling the business for cash.
- Berkshire might be able to solve future liquidity needs for some of the largest family-owned businesses in the world like S.C. Johnson, Koch Industries, or Cargill.
- Berkshire has used stock for large acquisitions in the past like Burlington Northern Santa Fe Railroad in 2009 or the General Re acquisition in 1998.
- Stock acquisitions are more attractive if Berkshire management sees the shares as close to or above their estimate of intrinsic value.
3) Investments in the 5 Japanese Trading Houses
- Berkshire’s investments in the 5 Japanese “trading houses” Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo began in 2020.
- It was revealed in the meeting that although Buffett was the one who identified the opportunity – “turning the pages” looking at Japanese stocks – it has since been Mr. Abel leading the ongoing dialogues with the firms, and visiting with them several times a year.
- Notably, the scale of these public market investments overseen by Mr. Abel at over $23b is likely more than either Berkshire equity portfolio managers, Mr. Combs or Mr. Wechsler, currently manage individually.
- In the meeting, Mr. Abel spoke about the cultural similarities between Berkshire and the trading houses and the potential for these investments to be a springboard for joint ventures and deals around the world with each of the firms.
- They reiterated their intention for these to be investments for the next 50 years.
4) GEICO is back on track
- Mr. Combs who was originally brought on as an equity portfolio manager, has also been the CEO of GEICO since January of 2020.
- GEICO had been losing share to Progressive and others and was behind in telematics (devices that track driving behavior) and pricing.
- Today it was revealed that a revamped GEICO now has a combined ratio in the 80-90% range, which is incredible. This means that their underwriting profits are over 10%, when very good insurance operation may only have a 5% profit.
- Combs also overhauled the technology of the firm and Mr. Jain believes they are leaders or peers in the industry with the best of telematics and pricing.
- Surprisingly, Mr. Jain reported “tens of thousands” of jobs were cut at GEICO in the overhaul.
- That could very well be a taste of the changes to come within broader Berkshire as they seek continuous improvement under the leadership of a new generation.
5) Utilities are tougher places to be
- Just like Mr. Buffett confessed the sin of that one time they paid a 10-cent dividend in 1967 in this year’s letter, he also admitted the biggest mistake in the PacifiCorp acquisition was not to break up the west coast utility into companies divided by state to ring fence the liabilities.
- They admit the legal and governmental environment in some states is trying to make utilities the “insurer of last resort” in the case of wildfires has lowered the value of these businesses substantially.
- They do, however, still believe that Berkshire-Hathaway Energy will be able to deploy meaningful amounts of capital to earn regulated rates of return, especially with greater power demand needs and an aging grid.
- Mr. Buffett made a plea for more federal coordination of electric grid policy and planning amid the patchwork of 50 states of regulations, plans, and differing environmental targets.
- This reaffirms our view at HVP that utilities (beyond those owned inside our Berkshire holdings) are best viewed through our special situations framework.
Stay tuned for our takes from the Markel Shareholders Brunch on May 4th and we will also be sharing our list of the best 2025 meeting quotes from Mr. Buffett and Mr. Abel in the coming days as well.
Prior to the meeting, InvestmentNews’ Gregg Greenberg checked in with HVP for our thoughts. You can read the comments in that article here.
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