On the evening of May 4th Beijing time, Berkshire Hathaway, led by the stock god Warren Buffett, held its 2024 annual shareholder meeting in Omaha, Nebraska, USA.
At the annual Investment Spring Festival Gala, Buffett, who is about to turn 94, sat on the podium again and shared his investment "Bible" with investors from around the world.
This year marks the first shareholder meeting held after the death of Warren Buffett's golden partner, Charlie Munger.
Starting from 9:15 am local time on May 4th (10:15 pm Beijing time), during a nearly five hour Q&A session, "Stock God" and the company's other two vice chairmen, Greg Abel and Ajit Jain, answered a total of 37 questions, once again presenting a wonderful investment feast for global investors.
The following is a complete transcript compiled by a reporter from Pengpai News, with over 45000 words in total and slight deletions.
Warren Buffett: Now you see the first investment video, which is the report for the first quarter. Now Berkshire's operations and all of its revenue are also the results of our operations. There are also some other changes in the middle, such as in the first quarter, which you have seen, and it is also better than last year's first quarter.
Mr. Jian wants me to tell everyone today that he is currently discussing some calculations for insurance in the first quarter, and it is not possible to conduct corresponding analysis on insurance. Of course, the corresponding storms happening around the world will also affect our income, which is the first and most important reason. Perhaps by our standards, the timing may not be right, especially what happened on the east coast, which is also the most risky thing we feel we must do when conducting evaluations. Additionally, there are earthquakes.
I cannot say a quarter is the best, but I cannot say it is the worst. In the insurance industry, there will always be lucky times or times when one cannot consider anything at all. However, in the insurance industry, we will definitely make further improvements, and the returns in each annual report are particularly high. So as you can see in the report, we already received fixed short-term investments last year, and there were also changes in interest rates. So, such a number looks very eye-catching.
I can tell everyone that we can still invest more money now than before, which is a phenomenon now. And I think it's reasonable and can be predicted.
Looking at the revenue of the railway, I think its decline is still relatively smooth. Of course, we cannot immediately speculate on certain benefits or situations that may occur immediately. Now when it comes to some of the impacts on railways, there is still potential income. For example, how many carriages did we install in the previous week, and some of the scale in between may also be changed. So, every week we have different earnings results, but these are relatively average. Some of the numbers we are expecting are expected and should earn more profits.
In addition, there are also energy companies that have achieved good returns. Sometimes, due to environmental impacts, we must indicate in our annual reports that the expected returns should be very stable. I think this is Berkshire's goal, and I hope to satisfy everyone. This is an example I just wanted to give to increase our operations. It's very simple, but that's what we've been trying to maintain.
The benefits mentioned are very interesting, but we must consider depreciation, amortization, taxes, and so on. Berkshire has at least 100 million inbound and outbound transactions every day, including weekends and holiday dates. Sometimes when you flip to the next page and look at this number, you can see why I explain it this way. Sometimes there may be mistakes in what we do, but I think the mistakes we make may not be truly very painful.
Probably at least five or six times, or maybe a dozen times, in the past 57 or 58 years, no matter how it is done, I think the most important thing is to make big decisions and continue to become our guiding principle now. We have a really great group of shareholders among us, and a group of our partners who are always hoping to save us costs. This is the group of people I just introduced, the David family, as well as their sons, grandsons, and great grandchildren.
Our cash and treasury bond, at about $182 billion, may rise to $200 billion by the end of this year, or reach $200 billion by the end of this quarter. We want to spend this money, but if we want to spend it, we must find a suitable target. I hope the risk can be small enough and the return can be significant.
Our stocks have also slightly increased in value compared to when we bought them, and we will not make stock purchases in a large way because many companies will not sell in large amounts. So, we will also be cautious enough in stock repurchases.
We move on to the last slide, and based on the situation over the past five years, we are unable to issue as many stocks as other companies. We have so many investors that we need to control the number of circulating shares. They don't want to sell our stocks, do they? We may not pay attention to stock prices every day or every week, and those who pay attention to stock prices every day may not make money. Many times, when people buy our stocks, they just leave them there and don't even look too much.
These are some of Berkshire's past stories. We will bring revenue growth to everyone in the long run, and we hope to reduce the number of outstanding shares. We also hope to occasionally see investment opportunities and have a suitable and high-quality position.
Okay, that's all for the background information of the first quarter. I'll hand over the microphone to Becky Quick for the next Q&A session. Questions between Becky and the audience will alternate.
Question 1: There was some news this morning that Berkshire sold another 125 million shares of Apple stock, which is now Berkshire's heaviest holdings. A 27 year old B-share shareholder from Malaysia said that last year you talked about Coca Cola and American Express being Berkshire's two longest holding companies, and you also mentioned that these businesses have brought good returns to shareholders. But you didn't include Apple in their list, do you think that from Apple's perspective, its attractiveness and investment charm may have declined compared to when you invested in 2016?
Warren Buffett: We still have a lot of Apple stocks, and I would like to say that by the end of this year, Apple is likely to be the largest holder of common stock in our history. Charlie and I both look at the equity of these common stocks, and we consider them as businesses, not just stocks. We also have stocks of Ice Queen, and we see them as businesses. Coca Cola is also a company, and Yuntong is also a company. We see them as businesses, as companies.
We can buy great companies, but we cannot buy all or more than 80% of their shares. When we examine Apple, Express, and Coca Cola, we see them as companies. Of course, there are differences in tax, management, and other factors, but when we allocate funds, we look at each company instead of just treating them as investments in stocks. We also don't want to predict the market, nor do we try to "select stocks", just select stocks.
I have been interested in buying stocks for a long time, and I am also interested in the stock market. I think the stock market is full of charm. But in the end, I heard a wise investor give me a motto, just a few words. He said it better than me at the time, roughly saying, "When you look at stocks, you should see them as a company, a business. Don't see them as bringing you returns, but rather how they serve your portfolio in the long run.".
This sentence deeply inspired me at the time, and Charlie and I have been thinking about it all along when allocating assets. Our investment philosophy over the years has actually changed a lot with the increase of capital. But the most basic principle is still there, which is Graham's philosophy. If you're just picking stocks, you're wasting time. You need to put your funds in a better place. Charlie gave me better advice to allocate my money to a more suitable place.
So that's why we have always had excellent businesses like American Express and Coca Cola. Apple is even a better business, a company. We will still hold the stocks of these three companies for the long term and have achieved a lot of success in the past.
I think as investors, we need to have a positive mindset. When something happens, it may significantly change our capital allocation strategy. But in the case of Apple, it will still be our biggest investment in the long term. However, in some current situations, I don't mind the continuous growth of our cash and will look at alternative options in the equity market in the stock market.
One thing that may surprise everyone is that almost everyone I know is paying a lot of attention to not paying taxes. Of course, I think tax avoidance is reasonable. Although we don't mind paying taxes on Berkshire's side, we are currently paying taxes at a federal tax rate of 21%. That's 35% on Apple's side, which used to reach 52%. The federal government owns a portion of our income, which is a portion of our revenue that needs to be handed over to the government. And such a tax rate could potentially change its percentage in any year.
The current tax rate is 21%, and due to the current fiscal policy, I think this tax rate is likely to increase in the future. High tax rates are likely to occur in the near future. The government may want to take a larger portion of Berkshire's revenue, and they may also decide not to want their fiscal deficit to remain so large.
We know that their expenses are indeed significant, and they may take a larger portion from a large company like ours. But we will still pay taxes, and we also hope that Berkshire can contribute to federal taxation. Because for us, for this country, this is appropriate. Because of this country, its economic development has brought generous growth to our shareholders. We are fortunate to be a member of an American company.
Last year, we paid over $5 billion in taxes to the US federal government, which also made us proud. I don't think any American company could be as rigorous in federal taxation as we are. And this doesn't include any property tax or social security tax yet, I think these may all happen in the future. I hope to continue maintaining a market value of over 800 billion US dollars, because with such a market value, paying large taxes will not cause me too much trouble. I hope every company in the United States can be like this. If I pay a 21% tax this year, I won't mind if this tax rate rises again in the future.
Question 2: Hello Buffett, I come from Hong Kong, China. I have my own investment company, and learning from you is truly a precious opportunity for us. You invested in BYD's company before, but now you are reducing your position. Do you think there is still a chance to invest in Chinese companies in the future?
Warren Buffett: Our main investment targets will be located in the United States, which we firmly believe. You see, the companies we invest in in the United States, including companies like Express and Coca Cola, all have global business. They are a priority for global consumers, such as beverages. There is a global consensus that companies like Yuntong and Coca Cola cannot find a comparable target globally. I think their business is very strong. I think this situation has been ongoing for over 20 years.
I think BYD's investment is quite similar to what we made in Japan. We quickly made investments and spent a year investing in five important Japanese companies. You may not see us making such a large investment outside of the United States, especially considering the current global economy.
But I understand your question, the role that the United States is currently playing, as well as our strengths and weaknesses, which are all within our understanding. But my feeling is that I cannot fully understand the world economy today in any culture or in some other countries.
For example, in some smaller countries, their economy may not be as strong, but they already have some corresponding economies within that country. What I'm going to talk about now is that about half, 50%, and perhaps more than 20% of these countries in the world can produce output, which is very surprising. But we will still be primarily focused on the United States, and investing in the United States is currently our relatively main direction.
Meanwhile, in the past few years, Charlie has also told me that he often talks to me about these things. Sometimes when I give him some advice, he says, "This is not very good, but maybe this is the best idea you can come up with so far.". He sometimes agrees with me, but Charlie often tells me to think twice before taking action.
If BYD looks back, Charlie was very, very positive at that time. I should have been more positive than him, but I didn't. So for us, it was still a big deal at that time. We have considered many companies. Of course, in most markets, I am still familiar with some of the situations that have occurred. But my idea is that for some huge commitments, or in some countries, we don't have such plans yet.
Of course, this is not impossible either. I feel quite satisfied with our stance on investing in Japanese companies. But you must take a look at the overall situation, the situation in the whole place may be different. We also need to truly take care of the money you invest, and we absolutely cannot tolerate any situation where you may lose money. At present, we are in the United States and we hope that we have not made any more major mistakes.
Question 3: The following is a question from Salt Lake City. We know that you have already explained in the 2024 annual report. But for the energy sector, Berkshire may have disappointed us a bit, especially with the situations we are seeing now. Our investors are certainly concerned about some changes in the current environment and regulatory measures. So in this situation, have we already accepted these so-called utility models for electricity, and then we are also doing so in their direction? Additionally, we know that some regulatory agencies in Utah have also begun to enforce plans to purchase energy. Can we reconsider investing in energy or investing in power plants before retirement?
What I want to ask now is, can some of the measures taken by Berkshire Energy in Utah reduce some future losses for the company? Because some states have already started controlling this electricity, or in public utilities.
Warren Buffett: Let me put it this way, I feel that some of the things that happened in Utah are also fair to us. Their work has given us some respectable rewards, as these things are still our own assets.
If we talk about public electricity, I would say that in 1930, Mr. George Norr, who was a senator, we also had some different experiences at that time. What I must point out now is that free economy and free competition are still the roles we play. Some privately owned power companies or public utility companies may operate more efficiently and better than those owned by states or countries.
But we know that when it comes to these public utilities or public electricity, there may be significant investments in many places, and we must spend a lot of money on power companies. Sometimes, private investors may not be able to handle these situations.
So, Berkshire's company is actually quite satisfied with the parts we are currently involved in, as well as some areas that are highly needed in the country. We will have returns, but the rate of return may not make us very wealthy, and returns are still sensitive.
Of course, if we have no investment return at all, we will not work in this area. If we really do, it would be too crazy. You will see some of the activities we are carrying out, including their costs and ongoing work, which may be related to the current environmental changes.
Of course, the cost of electricity or some public expenses today can sometimes be very surprising. But I think we still have some funds and we are also involved in major projects, which are very important actions for us in this country. I think we will still do this. We won't really throw this money into the water like this.
I called Charlie the wrong time again. I need to ask our Greg to answer now, but I mistakenly called Charlie. Actually, I have already reminded myself not to call the wrong person again, but sometimes I still slip my tongue.
Greg Abel: I am honored to take on this position, as you mentioned the energy aspect in your letter. The challenges we are facing in the industry today, I believe, are due to our significant investments in energy and more public utilities, and we still have many years to continue in between.
You just mentioned that there must have been some impact in Utah. But if we look at the special demand at the bottom again, under the establishment of such a state, the amount invested in public utilities today is very undeniable and eye-catching.
Do we still need to continue investing heavily? We are very attentive to public policy and it is very ongoing. Specific regulations will also make us feel very encouraged, especially regarding these public affairs within a hundred years