OWe respect Mr. Buffett and Mr. Munger for all they have accomplished through their 150 years of shared investment experience. This dynamic duo have made it a lifelong crusade to educate people on their investment thesis. The appreciation of owning Berkshire (BRK/A) since 1965 speaks for itself, but the comments on technology and innovation go far beyond their expertise. Buffett admitted he missed the boat in his career by not investing in technology. While success was found with the investment in Apple, the foray into IBM was a big miss. (Note that the chart doesn’t date back to Berkshire’s founding, but the shareholder reports make that clear.)[wce_code id=192]
Nonetheless, while reading Cinthia Murphy’s report, What We Learned From Buffett and Munger at BRK 2022, I was reminded of the many parallels that exist between Berkshire’s HODLers stocks and those of Bitcoin and crypto. With that in mind, maybe they’re not as pure as the headlines read? A billion dollars is not change.
- Tribal: Warren Buffett said, “People are getting more and more tribal. My general assumption – there’s no way to prove it – but essentially people are behaving a little more tribally now than they have in a long time. Wait, no way to prove it? Isn’t there evidence that 30,000 Berkshire shareholders attended the Berkshire meeting and about 20,000 people attend Bitcoin, crypto and blockchain conferences on a quarterly basis? (Note that members of the Toroso investment team will be attending Consensus 2022. ETF think tank members should email us to receive a special discount off the $1,599 admission price.) . Otherwise, why do you have 1.720 million followers on your Twitter account @WarrenBuffett? Sometimes you communicate with folksy, simple responses, but all the while you’ve inspired a cult like following.
- Faith and Trust: Investing in Berkshire Hathaway shares assumes that Warren Buffett, Charlie Munger and the whole conglomerate will continue to generate enormous value thanks to nearly $90 billion in earnings in 2021 and $144 billion in cash HODL. It’s a leap of faith no matter how you cut it, and at different times it’s been tested. The magic touch was not evident for almost 12 years; especially in 2019 and 2020.
- Fundamentals and Intrinsic Value: Remember that Berkshire does not pay a dividend and the company is essentially controlled by Mr. Buffett, who continues to hold the title of Chairman and CEO. Berkshire investors won big by HODLing their shares – not because Berkshire shares aren’t falling in value or going through tough times of underperformance, but because they had confidence in the investment philosophy. long-term. An investment philosophy or “thesis” is not a guarantee of success, but rather a strategic discipline. At this point, we would say that Berkshire shares are currently trading around $46,500 due to expectations about the value of its assets more than anyone who really knows what the assets are really worth. Who wants to guess what the intrinsic value of Geico’s cash flow is to Berkshire shareholders? Do you think Bill Gates, through the Bill and Melinda Gates Foundation (which owns about $10 billion in BRK/B stock), did the math?
- War chest: Buffett ready to spend his war chest? Considering Berkshire announced it invested $40 billion in this first quarter, he’s probably on the hunt. Desperate times are the best of times for an ironclad track record like Berkshire. Berkshire does not trade the weather, but expects Mr. Buffett to step up spending if markets continue to decline.
- Crypto Truth: Buffett and Munger’s comments on bitcoin and crypto weren’t 100% aligned with how they invest. Berkshire’s crypto exposure exists through Nubank, where the company has a loan of $650 million and a few billion invested. Of course, Nubank could become an excellent investment for Berkshire. As a Fintech platform company, leading the way in Brazil with 54 million customer accounts, Nubank offers a taste of Fintech for Berkshire. Sorry Warren – maybe it was just bad timing and forgotten at your shareholders meeting.
We’re not looking to fight Berkshire investors or value investing in general. It is, however, surprising to see Berkshire among the top shareholders of NU Holdings, given that the other shareholders listed as investors are all aligned with growth mandates. At the heart of the ETF think tank, we believe in diversification and have advocated for value investing. Readers of these blog posts will recall that we highlighted Distillate Capital (DSTL).
In Omaha, folksy is cool and simple is simple. Thank you, Cinthia Murphy, for participating in the BRK2022 event. We all have a lot to learn from 150 years of experience. The question is whether the wisdom of value investing is transferable to fintech. Also, even though NU Holdings is the leading disruptor of NEO banks in Brazil, why are you making derogatory comments about crypto when trying to capitalize on a platform that provides access to 54 million people? Stay in your lane!
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