Welcome to the 40th edition of Value Investor Digest
The Livestream of the Berkshire Hathaway Annual Shareholders Meeting will take place this Saturday (click here to set a calendar reminder) and so we have several articles to bring you related to that event, including a link to the live stream. In addition, this edition features an article which reveals Berkshire has recently invested in Amazon, a video which shows the performance of all 125 stocks presented at the London Value Investor Conference since 2012, an FT ainterview with Warren Buffett, an Economist piece on European airline consolidation, Steve Eisman’s Oxford Union address, a Staley Cates and Prem Watsa podcast, one of Warren Buffett’s first TV interviews, a Citywire Selector article on Spain’s “Value Investing Obsession”, an Institutional Investor article on the science of fund selection, a John Authers article on volatility versus risk; plus LVIC speaker Sir Martin Sorrell speaking about the “Walled Gardens” which still exist in digital advertising.
The annual meeting will be streamed live on Yahoo Finance on Saturday from 9.45am ET (2.45pm BST). For anyone unable to travel to Omaha for the meeting the streaming of the event has been a welcome development. Over 1 million live viewers are expected to tune in from around the world to listen to Buffett and Munger’s wit, wisdom and insights. They normally take questions from journalists, analysts and shareholders in the audience for around five hours. If you can’t watch live then you can also watch on demand at the same link for 30 days after the event. (click here to set a calendar reminder)
You can also see our video archive of all Berkshire Hathaway Shareholders meetings since 1994, including selected highlights from each year.
Referring to Ted Wechsler or Todd Coombs, Buffett said “One of the fellows in the office that manage money…bought some Amazon so it will show up in the 13F” although he added that “I’ve been a fan, and I’ve been an idiot for not buying…But I want you to know it’s no personality changes taking place.”
The London Value Investor Conference has had 125 stocks presented at it since it started in 2012. A video has been produced which provides an overview of the top performing stocks presented at the LVIC each year, the top compounders (including 20 stocks which have compounded at 20%+ p.a. since presented) and also the performance of all the stocks presented each year at the conference when considered as a portfolio versus major indices.
Three FT journalists sat down with Warren Buffett in his office in Omaha for nearly three hours covering lots of topics. As with this quote from the article where Warren answers a question about Berkshire’s relationship with regulators, Buffett often puts things in a way which invites readers to reach a certain conclusion, but without him putting it forward directly. “We will behave well, and we can afford to behave well. Whether we behave well because we’re rich or whether we’re rich because we behave well, we’ll never know.”
“European skies have grown less crowded of late. The number of airlines in Europe has fallen from a peak of 180 in 2003. Since the start of 2018 at least 14 have collapsed…That is good news for shareholders, less so for flyers”
Earlier this year Steve Eisman took part in a debate at the Oxford Union. Eisman spoke for 10 minutes in opposition to the proposition: “This House Regrets Blaming Wall Street For The Global Financial Crisis”. “It has been my experience that most people, even extremely educated people, don’t fully understand why the financial crisis happened. So rather than throw thunderbolts I am going to spend most of my time trying to explain what happened because I think in the explanation the answer to the question will be fairly clear.”
In this Price-to-Value Podcast Southeastern Asset Management’s Vice-Chairman Staley Cates interviews Prem Watsa on his Insights on Investing, Underwriting and the Importance of Culture. On active investing, Prem remarked “Active investing, when you are picking stocks one by one is I think long term the only way to go but it takes a lot of time and a lot of devotion to the task.”
Many readers might have seen clips of Buffett speaking in this interview with George Goodman in 1985 before, but perhaps not the full 7-minute interview which is included here. It is remarkable that many of the timeless principles Buffett speaks about in this video are not unlikely to be repeated at the Berkshire AGM tomorrow: “The intellectual process is defining your area of competence in valuing businesses and then within that area of competence finding whatever sells at the cheapest price in relation to value; there are all kinds of things that I am not competent to value. There are a few that I am competent enough to value.”
Many long-time attendees at the London Value Investor Conference will be aware of the strong value credentials among many investors from Spain. In some years, more than 70 attendees have travelled from Spain to the LVIC to hear from our speakers – including some of those highly rated managers featured in this Citywire Selector article (Cobas, Magallanes and azValor). The article comments on azValor, who were the highest rated speakers at the conference in 2018: “It sounds evangelical because it is. A religious-like belief in the philosophy is required to put your savings in funds which appear radical. For example, in March 2019 AzValor’s International fund has a 99% active share and 65% of its holdings in the commodities sector. This isn’t your run-of-the-mill global equities fund”.
Institutional Investor looks at how applicable scientific studies in to issues such as cognitive bias are to the due diligence processes conducted on asset managers: “In conducting due diligence on investment firms, the correct null hypothesis should be that there is no alpha present…This means the default assumption should be not to hire the manager, and due diligence should be positioned as the search for evidence to disprove that. That is to say, the search is for a reason to say yes.”
This John Authers article analyses some of his readers responses to the ideas put forward in Peter Bernstein’s book “Capital Ideas” on equating volatility and risk – with one reader citing risk being the same as volatility as being an example of the ‘streetlight effect’: “A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, ‘This is where the light is.'”
Sir Martin Sorrell will be taking part in Fireside Chat and Audience Q&A with Robert Hagstrom at the London Value Investor Conference on 14th May, titled “The New Marketing Reality”. This article and podcast provides a good primer in to the way Sir Martin thinks about the way investors and businesses should think about building and sustaining brands through their marketing in future: “Walled gardens are dominating digital business at present. Their reluctance to share data is increasing…With the advent of the internet and the demise of local businesses, many brands saw an opportunity to create direct client relationships for the first time. Platforms, however, have driven a wedge between brands and their customers.”