hey guys it's Dan here again, welcome back to this channel and in this week's
video we'll be looking back at one of the most important events in the
financial world, it's one of the most scrutinized and anticipated events, the
Berkshire Hathaway annual meeting was recently held on the 2nd of May and in
this video I'll be sharing with you three key takeaways from this event and
I'm sure you guys will agree with me on this that Warren Buffett is arguably the
greatest investor we've seen in the modern era and at the age of 89 he still
gave a compelling speech and sat through another two hours worth of Q&A
session, wow and those questions weren't easy to answer at all I mean that in
itself is truly impressive, just the stamina and the clarity in
communicating his thoughts and you know when this guy is talking the whole world
is listening and this was the first time in Berkshire's history that this meeting
was hosted virtually with Warren Buffett sharing an empty arena with one of his
potential successors Greg able, last year the annual meeting attracted more than
40,000 people and this time though his right-hand man wasn't there either
there was no Charlie Munger who was actually another 7 years older than him
at 96, one thing that hasn't changed though is the cherry flavored coke cans
and this is no surprise have you been following him as an investor you'll know
that he is the biggest shareholder of Coca-Cola, having made his first purchase
of Coca-Cola shares in 1988 and a couple more times a few years following that
his total cost basis added up to around $1.3 billion, roughly a 10% stake in the
company and this investment alone is now worth approximately $17
billion dollars, during these 30 odd years he had built Berkshire into a
massive conglomerate which is basically a company that has multiple businesses
in a variety of industries and Berkshire went from a book value of $4.9
billion in 1989 to $375 billion as of the first quarter this year
in the most recent fortune 500 ranking Berkshire was actually ranked fourth by
total revenue at $247 billion dollars and just by the
sheer size of this company you can really tell how much publicity surrounds
it and the annual meeting this year was indeed like no other the meeting opened
with a history lesson on America and I feel there is no other person more
qualified than Warren Buffett as an investor to give a speech like that at
this point in time given his professional and life experiences, the
first key takeaway I want to talk about is that the American magic or miracle
has always prevailed and it will do so again we all know that America is now
the worst hit by the whole global situation, just thinking about the number
of deaths, the doctors, health workers that have sacrificed their lives and the
people that have lost their jobs around the world
the unemployment rate now in America is over 14%, that equates to around
33 million people, that is almost the population of Canada, so just imagine 90%
of the people in Canada are jobless and if we compare historical unemployment
rates we'll discover this is actually the highest it's been in 70 years, so I
think if you listened to how Warren Buffett spoke you can really tell he's
trying to instill confidence and comfort in people's minds again, he showed how
much America grew in it's 231 years of being a country and he used a simple
slide to convey just how young America still is, 231 years old compared to 185
which is his age and Charlie's age added together it just shows how much life he
and Charlie have lived through, the events they've been through and what it
really means to be living in 2020, Warren Buffett believes that if someone were to
pick a time and a place to be born it wouldn't be 1720
1820 nor 1920 but today and to be born in America, during the Great
Depression the Dow crashed by around 83% and
eventually it would take the market 20 years to recover this loss, if you had
bought the Dow around the 1950s you would have made $100 dollars for
every dollar you invested and Warren Buffett said all you had to do was buy a
cross-section of America you didn't have to read The Wall Street Journal you
didn't need to look up price of stocks and you didn't need much money at all
all you had to do was believe and have faith, but the important thing he
reiterated was to never bet against America, the second takeaway is how he
described the essence of investing we don't know what the market will do
tomorrow but Warren Buffett said he knows America will move forward over
time and even if you were to make bets against America you have to be very
careful about how you do it, Warren Buffett then went on to make an analogy
between investing in stocks and investing in a farm, so you buy a farm
because you believe it has potential to grow not because you feel you're
pressured by this obliging neighbor (as Warren Buffett puts it), quoting prices to
you wanting to buy your farm or sell their farm to you every day and yes it
would be good to have this kind of neighbor though right, because the prices
won't be the same every day and you could take advantage of that, so when
they're selling low you can decide whether to buy their farm or with them
buying a high you can decide whether to sell yours, and this kind of situation is
exactly like the stock market, the quotes that come out every day or even every
hour minute second should appear to you as a big advantage, but there will be
people trying to profit from you telling you what the stock prices are going to
be in a week's time, month's time etc, so if you're buying in and selling out every
day or every couple of days are you really investing, stocks may go down but
you have to ask yourself has the business fundamentally changed, the third
takeaway I want to share is that the world has changed for the airlines and we
don't know how it has changed, Berkshire's first ever airline investment was the
US Airways back in 1989 and that didn't go well as the
airline ran into a lot of problems, though Berkshire recovered its
investment in the end but Warren Buffett regretted that investment very quickly
fast forward by 20 years, in 2016 Berkshire took major stakes in four of
America's major airlines which amounted to around $7 or $8 billion in
cost this was actually a huge move not only because of the dollar amount but
because Warren Buffett hasn't always been a fan of investing in airlines
as we now know but before the airline industry was hurt by the pandemic this
year his airline holdings actually grew to around $10 billion dollars looking
very promising, unfortunately he made the call to sell them at around $6.5
billion because he believed the industry isn't going to be the same
anymore, in his 2007 letter to the shareholders of Berkshire he wrote that
the worst sort of business is one that grows rapidly, requires significant
capital to engender the growth and then earns little or no money, think airlines
and then in that second paragraph said that the airline industry's demand for
capital ever since the first flight has been insatiable investors have poured
money into a bottomless pit attracted by growth when they should have been
repelled by it, I just decided that I'd made a mistake were Warren Buffett's
exact words in the 2020 annual meeting but he also highly complimented that the
airlines were well managed and run but now the airlines are having to suspend
their dividend payouts and borrow massive amounts just to stay afloat
there was no way that anyone could have seen this coming
and that the airline industry would be hit in such a major way, so was it really
his fault as he seems to regard that as a mistake, so the question is has the
airline industry fundamentally changed and this is a really tough question to
answer even for Warren Buffett because no one knows when and how the airline
industry will recover, travel will eventually resume but to what extent and
how many passengers can be flown at once are just some of the questions to be
answered and will profitability recover to pre-pandemic levels I think is what
he's really worried about, just look at how many airlines have declared
bankruptcy or needed the government to inject capital, one thing he knows is
that their balance sheets will now be highly geared on top of an already
capital intensive business and I mean what is he going to do with $6 billion
invested in an industry which he is now uncertain of and he's not getting any
dividends from them, I think he would be making a huge bit if he hadn't sold, and
his decision-making process really ties in with the second point we talked about, to
develop your own independent outlook and don't be swayed by the people around
you, for sure there will be people who will disagree with Warren Buffett's
decision but that was after his own evaluation and what he was really
comfortable doing, at the end of the day you shouldn't be counting on someone
else making the decisions for you and if you're going to buy stocks be prepared
financially and psychologically and expect to hold them for a considerable
amount of time, be prepared that it may fall 50% or more and still
be comfortable with that holding because if you can't handle it psychologically
then you shouldn't be buying stocks at all and the key thing is to do something
you understand yourself otherwise you're going to be easily affected by the next
person you talk to them, these are all Warren Buffett's advice and I really
encourage you to go back and watch certain parts of the meeting on YouTube
I'll post a link in the description below and also post the time stamps of
where he talks a lot about investing, I hope you enjoyed this video and found it
valuable, thanks for watching and have a great day