Notes from berkshire hathaway

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Whew! May was certainly busy. It started with my annual trek to Omaha for the Berkshire Hathaway annual meeting. The weekend started for me on Friday night. I attended a meeting hosted by Whitney Tilson and Chuck Gilman. Whitney is founder of T2 Partners, a very successful hedge fund, TheTilson funds and the Value Investing Congress among other things. Chuck runs a family office in Oklahoma City for a well known billionaire businessman. They team up to provide seed money to up and coming investment managers. Mostly the people they look to fund are individuals who normally would not be able to raise enough money on their own. For instance if you haven’t worked for a hedge fund it can be very difficult to raise the cash needed to start the business much less fund the investment vehicle itself.

I was the first one there and got a chance to talk with Whitney for awhile. If you watch CNBC or squawk box he is a regular guest. Only about 15 to 20 people showed up. Basically they are looking for value oriented managers who do their own research and are independent thinkers. So far they have funded 5 startups. 4 have did pretty well and 1 guy blew up. Chuck Gilman said that for the most part some of these guys would never be able to raise money because they’re just too plain peculiar. They might be short on social graces and can’t figure out how to tie a tie but their fund is up 40% a year for 5 years in a row.
I really like the approach they have. They don’t care who you know, where your from, or who you’ve worked for. All they care about is do you understand how to value an investment. I left thinking that this is a definite possibility for me. Chuck told me to submit ideas to them and they would take a look at them and quiz me etc. This is of course a process so it could take a number of years to make something happen.
The downside of course is while they might write you a $20 million check in return they want a piece of your management company. I think I’ll try on my own in the meantime.
The meeting itself is quite a spectacle. I can’t remember how many I’ve went to but I think this is 7 or 8. It just gets bigger every year. The doors open at 7 and got there about 6. There was already thousands who beat me there. People come from literally all over the world to hear Warren and his sidekick Charlie Munger speak. The meeting starts with the company movie which is always very humorous and well done. After that they take questions until noon.
The entire bottom floor of the Qwest center is taken up by displays of Berkshire companies. Sees Candies, Dairy Queen, Coca-Cola are of course front and present. Also Justin boots has an incredible display as does Fruit of the Loom. Did you know the Fruit of the Loom guys you see on TV are always the same people? They do this year round. What does your dad do for a living? He’s a grape. They’re very nice guys and had a lot of fun with my son who came to the meeting last year. In fact, as Laurie and Sumner were leaving the Qwest center to go to the zoo they ran into Mr. Buffett in the hall. Sumner gave Warren a big smile and Warren couldn’t help giving it back. He really is about as down to earth as you can get. It’s clear that he has a lot of fun at the meeting and feels very fortunate to have the level of success he has had. I remember a couple of years ago a little old lady got up to ask a question at the meeting. She stammered and stuttered and appeared very nervous. Indicating that she probably shouldn’t even ask a question because she owned only one share Buffett responded by saying “ Well maam between you and me we own more than half the company so what’s your question.” He really made her feel important and I thought that was cool.
The range of questions is always interesting. It’s probably the only annual meeting in America where no one ever asks about quarterly or yearly earnings. I think because they have such a high level of trust for Warren & Charlie, and the shareholder base seems to be more owner oriented than anywhere else. They understand how long term shareholder value is built. The big question that seems to be on everybody’s mind is of course the succession issue. With Warren being 77 and Charlie being 84 who will replace them? I have a theory here. I truly believe that the decision of picking his successor is the biggest decision of his life. After all Berkshire is his life’s work. Whoever it is I am absolutely convinced that they will retain the corporate culture which is what makes Berkshire so special. The other thing is Berkshire is a cash flow compounding machine. Without doing anything book value can continue to grow in the high single digits. Hey new guy just don’t screw it up. Warren has always said that when he dies the stock will probably fall and that would be great time to load up. They have pared down the list of possibilities to 3 and they are currently managing some money for Berkshire. My bet is on Tom Gaynor of Markel. Tom has managed money at Markel for many years and has a track record and philosophy very similar to Warrens. Also Markel is an insurance company that is set up very similar to Berkshire. Tom has always been my number one pick. Interestingly enough I found out last fall from Whitney Tilson that he wrote a letter to Warren recommending who else but Tom Gaynor. In truth I can see Warren still running the company in 10 years. He states that investment knowledge is cumulative and this is proven in his savvy investments the last couple of years.
I will be happy to furnish a complete transcript of the meeting to anyone who is interested. It is a must read for anyone really interested in investing. I have to thank my friends at Chanticleer Capital for emailing me the notes. Thanks, Matt. Also if anyone out there would like to go to next years meeting let me know. I have access to probably as many tickets as you need and would enjoy having someone along.
I always visit Borsheims and Nebraska Furniture Mart during the weekend. Being a shareholder you get cost plus 10% pricing on everything. Some people actually bring Uhauls to take all their purchases home. We didn’t need anything this year so I came home empty handed except for giveaways.
The festivities end on Sunday with dinner at Warrens favorite steak house Gorats. I’ve never stayed for this but next year I think I’ll try to stay one extra day and try it. I was asked to go this year but I had to get home by Sunday night. I heard last year Michael Eisner and his wife had to wait in line outside in a downpour. This fact was relayed to the Buffet table where Warren and his family were eating. Management wanted to know what to do. I think it was Susan Buffett who had the best line of the week. “I’ve had to stand in line at Disney World” Anyway I think they found a way for Michael and his bride to get in.
In summation I feel fortunate to have been able to see Warren and Charlie in their prime and to have met so many nice people. One day they won’t be there anymore and it just won’t really be the same.
I was accepted to the Value Investing program at Columbia Business School. I will be attending in June so I’ll give you an update when I get back.
Smart Money did a very nice profile on my friend Mohnish Pabrai. I would encourage everyone to read it. Mohnish is one of the most original thinkers in value investing today. He’s also a very fine gentleman.
One of the finest managed mutual funds is taking new investments after 24 years. The Sequoia Fund has finally reopened. Sequoia founded by Buffett buddy Bill Ruane closed its doors to new investors in 1983. The performance has never suffered with the fund being in the top 1% for virtually every time period you can measure it. Management said that their original investors are passing away and I think they see many buying opportunities for new money.
In a related story several other funds are opening up their doors again and taking new money. Longleaf Partners has opened up its Value and small cap fund and Third Avenue is opening its small cap fund for investment. This should probably tell you something.

Any one of these funds would be a great long term investments.

I firmly believe that most of the financial news shows are just a bunch of drivel, remember they are paid to entertain. But any show that has Whitney Tilson, David Einhorn, or Bill Ackman is well worth watching.

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