The Berkshire Hathaway annual shareholder meeting has become a pilgrimage for die-hard investors and fans of Warren Buffett. And each year, Buffett and his right-hand man, Charlie Munger, never fail to deliver, imparting words of wisdom and insightful anecdotes to inspire the everyday investor.
This year, the legendary duo shared their unscripted thoughts on a variety of topics, including investing, markets, the world economy, and lots more. Here are three things I learnt from the meeting.
Lesson No. 1: Be careful when investing in hyped-up IPOs with no profits
While Berkshire has finally invested in e-commerce giant Amazon, Buffett is still careful about investing in high-growth companies with no profits. He said these companies still have a lot to prove to investors and noted that the “jury is still out” on big-name IPOs this year such as Lyft, Uber, Pinterest, and Beyond Meat.
Nevertheless, he cited Amazon as the perfect example of how a money-losing business can ultimately thrive.
Investors should not avoid unprofitable companies entirely, but be cautious and only invest if you believe there is a good chance of success.
Lesson No. 2: Don’t rush your investments
Berkshire is currently sitting on a large cash hoard, with investors wondering if the company is better off putting the cash to use.
In response, Buffett said, “We are comfortable holding a lot of cash because we are operating on the assumption that we will have an opportunity to deploy it at very attractive rates.”
As investors, we should also be patient with the deployment of our capital. There is no need to rush into any investments. Do your due diligence, and if necessary, hold your cash until you are absolutely certain that a worthy investment has been found.
Buffett also added, “We could invest $100 billion next year, just not at the prices that we like. It is not in the interest of shareholders that we start behaving like everybody else.”
Lesson No. 3: You don’t need complicated equations to find the best long-term investments
While the people on Wall Street might want you to believe that investing is a complicated process that only the brightest minds can succeed at, Buffett believes investing shouldn’t be that complicated for the everyday investor:
“We do not have any formula that calculates risk. We do our own calculation of risk vs. reward in every investment. … We do not think that the results would be changed favorably by having lots of committees and lots of spreadsheets.”
Retail investors shouldn’t feel daunted by managing their own money. Finding good investments is not about complicated statistics or equations, but about looking for companies with wide economic moats and capable management that trade at reasonable valuations.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia owns Berkshire Hathaway B Class shares. The Motley Fool Singapore recommends Amazon.com.