2022 Berkshire Hathaway Annual Meeting | 10 Minute Summary

Each year, 40,000 Warren Buffett fans and Berkshire Hathaway shareholders gather in scenic Omaha, Nebraska, to listen to investing legends Warren Buffett and Charlie Munger share their thoughts on everything from the stock market and investing all the way to how to live a happy and successful life. Buffett and Munger usually spend five hours answering questions in front of a packed arena. People from around not just the United States but the entire world make the pilgrimage to Nebraska in order to learn from two of the best investors and businessmen of all time.

I was one of those 40,000 people in attendance this year, making the 1,200-mile journey from New York City all the way to Omaha. In this video, I'm going to summarize the five hours of wisdom that was provided by these legends into a 10 to 15-minute video. I took detailed notes at the meeting of what really stood out to me, and I hope you guys find it helpful. I'm going to cover everything from Buffett's thoughts on the stock market right now all the way to what stocks he is buying.

Make sure to like this video and subscribe to the channel because the making of this video literally involved me traveling 1,200 miles, all in the name of providing you guys with the best content possible. You guys are great! Now let's jump into the video.

Warren Buffett, through Berkshire Hathaway, manages the most closely followed portfolio in all of investing. His every move and decision is closely scrutinized and analyzed to better understand the moves he is making. One of the biggest criticisms of Buffett in recent years was that he has not been able to find any sizable, attractive investments, and Buffett even acknowledged this in his most recent annual letter, saying that he "failed investors by not being able to find any large attractive investments" for Berkshire. This lack of investment activity by Buffett resulted in a cash pile at Berkshire Hathaway that was approaching 150 billion dollars at the end of 2021.

This large cash position has been referred to in the media as Buffett's 150 billion dollar problem. Now, you may be asking yourself a question: why is Berkshire Hathaway having 150 billion dollars a bad thing? That's a fair question, and frankly, having 150 billion dollars in cash is a problem that probably all of us would like to have. To understand why this much cash is not ideal for Berkshire Hathaway, you have to understand Buffett's strategy for Berkshire.

Berkshire is what Buffett refers to as a "compounding machine." This means that the company has a portfolio of businesses that produce cash. That cash is then used to buy more businesses that produce yet more cash, and so on and so on. That's how Berkshire Hathaway evolved from a struggling textile manufacturer 60 years ago, when Buffett bought it, to a 700 billion dollar diversified conglomerate. This strategy hinges on Buffett being able to find attractive companies and stocks to buy with all that cash.

Buffett was clear why he hadn't been buying large amounts of stocks or sizable companies in recent years: he couldn't find anything sizeable that was trading at an attractive valuation. Many people pointed to this as a sign that Buffett thought the market was overvalued. However, things changed pretty quickly, and this was a main topic Buffett spent quite a bit of time discussing. Buffett went from barely investing any money to spending upwards of 40 billion dollars in a matter of just a few weeks.

Buffett said that this is one of the keys to successful investing: being willing to sit on your hands for a long period of time and then take massive action when an attractive investment opportunity comes along. These investment moves from Buffett included buying insurance company Allegheny and buying significant amounts of stock in Occidental Petroleum and computer hardware company HP. Instead of buying stocks in other companies, Buffett has spent the last year to 18 months repurchasing Berkshire Hathaway shares. Since the beginning of 2020, Warren Buffett has spent nearly 52 billion dollars repurchasing Berkshire Hathaway shares. That 52 billion dollars was enough to repurchase around nine percent of the total shares outstanding.

Now, the reason why this was so important is that Buffett for decades has been very clear that he will only repurchase shares in Berkshire Hathaway if the stock is trading for a significant discount to its intrinsic value. So, in other words, this was Buffett's way of saying that Berkshire Hathaway stock was too cheap. Buffett commented at the meeting that he had been continuing to repurchase shares so far this year in the months of January, February, and March. However, he made the comment that he hadn't bought back a single share in April.

This makes sense because Berkshire stock hit all-time highs in late March, nearly hitting 360 dollars per share. This is significantly above the 250 dollars per share it was trading at around a year ago. By Buffett pausing share repurchases now while still sitting on a huge pile of cash, this is likely his way of saying Berkshire Hathaway shares are no longer dramatically undervalued.

Beyond just talking about what is happening at the company Buffett runs, everyone flocks to Omaha to hear Buffett share his thoughts about what's going on in the stock market and the economy. Warren Buffett and Charlie Munger spent a significant amount of time discussing the "casino-like activity" that had become the norm for investors. They equated what has been happening in the stock market as more similar to gambling than investing. Charlie Munger called out Robinhood in particular, saying it was disgusting how the company encouraged inexperienced investors to, in his opinion, gamble on things such as using high amounts of leverage through borrowing on margin as well as trading stock-term options.

This is a common lesson from Buffett and Munger: they say that to be a successful investor, you have to view stocks as pieces of businesses and not just things that float around in price every day. They have frequently said that any investment you make should pass a simple test: would you be happy to own the stock if the market closed down for five years and you couldn't sell? If the answer to that question is no, then you shouldn't buy the stock to begin with.

One topic that is obviously top of mind for investors is inflation. With inflation hitting levels not seen in decades, most investors haven't lived through a period of time where inflation was this high. So naturally, as I'm sure you can imagine, people have plenty of questions for Buffett on how to invest during inflation. It makes sense that Buffett would be familiar with this topic, given that at 91 years old, Buffett has lived through his fair share of inflationary time periods.

His advice for the best way to protect yourself against the impact of inflation isn't what you would think. In Buffett's opinion, the best protection against inflation is your own talents and skills. Let me explain what he means. The reason inflation can be so difficult is because the price of goods and services increases by more than the average person's wages. So if the inflation rate is seven percent in the country you live in, but your wages only increase three percent, your earning power is not keeping up with inflation. If your wages aren't increasing at least in line with inflation, your wages are going down in what is referred to as "real terms," which factors in the impact of inflation.

In order to protect yourself against this, Buffett says that it's important for you to work on developing your skills within your profession so that you become one of the best people in your chosen field. If you are the best brain surgeon, plumber, electrician, lawyer, or accountant, inflation doesn't impact you as much as it does everyone else. This is because when you are extremely talented and competent in your field, you can raise your wage to at least match the inflation rate, if not actually exceed the inflation rate. This is because if you are one of the best at what you do, people will be more than willing to pay you more in order to get access to your services.

Another big worry for investors has been the health of the economy. It seems like each and every week more economists are starting to predict a significant slowdown in the economy and maybe even a recession. This tempts many investors to attempt to time the market by jumping out of the stock before the crash and then getting back into the market after the crash. However, Buffett talked about how this is extremely unwise. He emphasized that economic predictions have never factored into his investment decision-making process.

In his eyes, investors should take the following approach: if you know you will be investing for years to come, it's important to come to the realization that you will have your fair share of good and bad years. There will be years when the economy is booming, companies are extremely profitable, and stock prices are soaring. However, you as an investor will also experience the opposite. There will be times when the economy is rough, businesses are struggling, and stock prices are tanking. In fact, Buffett even mentioned that you don't have to have good timing in order to invest successfully.

Buffett hasn't been able to time the market perfectly and accurately predict what is going to happen in the economy with any reliability. But despite this, he has still been able to become the greatest investor of all time. In fact, I would make the argument that he has been able to become such a great investor precisely because he acknowledges he can't predict what's going to happen in the stock market or the economy, so he doesn't waste his time trying.

One of the most, let's just call it, controversial or polarizing comments from the meeting was Buffett and Munger's thoughts on Bitcoin. To put it mildly, Buffett and Munger are not fans of Bitcoin and cryptocurrency. Buffett laid out his argument for why. Buffett's investing focuses on what he refers to as productive assets. These are assets that produce cash for their owners. So think of farmland, which produces corn and soybeans that can then be turned into cash, or an apartment building, which produces cash through tenants paying rent, or Buffett's specialty: investing in businesses where the company produces cash for its owners.

These productive assets are valued based on the cash they can generate. On the other hand, you have what Buffett refers to as unproductive assets. These are assets that don't produce cash. The only way owners can make money from these unproductive assets is if the owner is able to sell that unproductive asset for more than what they paid for it. This is Buffett's criticism of Bitcoin. If you own an apartment building, each year that apartment building will produce cash for you and you will still have that building. For Bitcoin, it doesn't produce anything, and the only way you can make money is if someone comes along that is willing to pay more for it.

This is why Buffett makes the argument that there is significant probability that Bitcoin could go to zero. Another interesting topic discussed was related to Charlie Munger's investments in China. As most of you likely know, Munger bought Alibaba stock through the portfolio he manages at the Daily Journal Corporation, which is separate from Berkshire Hathaway. When Munger was asked why he made this investment, his answer was interesting. He said he invested in Alibaba because he could get more value for each dollar invested relative to the alternatives available in the United States stock market.

Let me explain what he meant by comparing Alibaba to its closest American peer company, Amazon. There are some key differences between the two companies, but Alibaba is commonly referred to as the Chinese Amazon. Amazon stock currently trades at a P/E ratio of 60. Alibaba trades at a P/E ratio of 25. This is what Munger is referring to when he said that in his opinion, he can get more value for his investment dollars by buying Alibaba compared to Amazon. For example, the lower a company's price-to-earnings ratio is, the more value you get for each dollar you invest, assuming all else being equal.

So there you have it. I hope you guys enjoyed this summary of the 2022 Berkshire Hathaway annual meeting. If you did, make sure to like this video and subscribe to the Investor Center because it's my goal to make you a better investor by studying the world's greatest investors. Talk to you next time!