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OC Leader Board: Warren is Back

Editor’s Note: Steven Check is president and owner of Costa Mesa-based Check Capital Management Inc., which has $1.5 billion in assets under management. Berkshire Hathaway Inc. is Check Capital’s largest stock holding. Also, its Private Program, which invests in Berkshire options, has generated annualized returns of 21.6% over the last 13-year period (verified by ACA Group). Check wrote this Leader Board for the Business Journal.

Before going to this year’s Berkshire Hathaway Inc. annual meeting, I was a little concerned about Warren Buffett.

As a devotee of his investment style, I first invested in Berkshire Hathaway in 1996 when it sold for $24,700 per share (it’s now about $500,000 per share).

Since then, I’ve attended every single annual meeting and have built my investment firm around Warren’s philosophies.

When COVID-19 caused the cancellation of Berkshire’s in-person meetings in 2020 and 2021, the annual meeting was held by video and Warren’s energy was down. Last year, the live conference restarted, but attendees had to prove they had vaccine shots and were healthy.

Warren’s answers were drawn out and included many hems and haws. This year, he seemed fully back! He was his usual jolly self, and his answers were much more concise.

World’s Best

Warren, in 1965, took over textile manufacturer Berkshire Hathaway (NYSE: BRK-A) and used it as his investment vehicle, eventually closing the apparel part of the business while keeping the name.

He became known as the world’s best investor by buying quality companies selling at attractive prices. He loved insurance companies for their ability to provide insurance “float” that he could invest.

One of his most famous investments was Coca-Cola in 1987, where his original investment of $1.3 billion has since returned $10.2 billion in dividends alone. The price is also up 25 times since then.

In the late 1990s, Warren was derided when he failed to catch the internet boom because he said he didn’t understand tech companies. But in 2000, he was validated when the internet stock bubble burst.

When I first began attending the meeting in 1996, there were about 4,500 people present.

In my early years, I ran into Warren at several cocktail parties where he drank Coca-Cola.

In speaking to him, he was jovial, giving funny answers followed by his own laugh. He does that at the annual meetings, too, where he and Berkshire Vice Chairman, Charlie Munger, are almost a couple of comedians.

Warren used to include in Berkshire’s annual report where he would eat dinner the night before the meeting, and I always made reservations at the same steakhouse, sitting only a few tables away from him and his family. That largely ended about 20 years ago when the meeting switched from Monday to Saturday.

Each year, it is still fun to show new attendees Warren Buffett’s home, which is a fairly normal house in an old, charming neighborhood of Omaha.

Why go in person rather than watch it online?

There are a lot of interactions among shareholders who exchange ideas. It’s a high-quality group. I sometimes meet the CEOs of Berkshire subsidiary companies, and it’s great to hear their passion.

This year, I met the CEO of a recent Berkshire investment—insurance company head of Markel Corp. (NYSE: MKL), which has a $17.5 billion market cap. Normally, it isn’t so easy to talk to such CEOs.

High-Quality Buyer

Warren keeps learning and adapting. As Berkshire has gotten larger, it has had to focus on big companies both public and private.

But like all intelligent investors, Buffett keeps looking to get more in business value than he pays in price. Stocks have not been as undervalued over the last 20 years as they were before.

Still, since 2000, Berkshire has returned 798% compared to 341% for the S&P 500.

An interesting observation is that Warren picked the winner out of the FAANG stocks—Facebook, Apple, Amazon, Netflix and Google.

Apple now makes up 35% of Berkshire’s publicly traded stock portfolio. In the last five years, Apple has returned 330%, more than double the second-best performer.

Warren credits the other two stock portfolio managers at Berkshire (which are set to take over when Warren departs) with convincing him to buy Apple. Warren learned Apple has built a moat around its iPhone, which he said many families would rather own than a second car.

Excitement

So, it was with excitement that I booked a room for Berkshire weekend, the first weekend in May.

Omaha hotel rooms usually go for double the price on Berkshire weekend and still sell out quickly. Instead of taking my team at Check Capital, I helped organize a group of 50 members from the organization, Tiger 21.

To qualify as a Tiger member, one must have an investable net worth of at least $20 million. Nonetheless, when asked, several of them volunteered to get in line at 5:30 a.m. and hold places for the rest of us. The arena doors opened at 7:00 a.m.

New attendees are quite surprised to see a crowd of 30,000 people sit and listen to 92-year-old Warren and 99-year-old Charlie talk about stocks, business and life.

Succession

Succession is often a topic at meetings. In the pre-meeting movie that takes place only for attendees, video clips from nine prior annual meetings were shown where shareholders asked about Berkshire after Warren’s gone. The first three clips were from 1994, 1995 and 1996, when Buffett was in his 60s.

The answer is always the same: Berkshire is much more than Buffett. The company culture runs deep, with many talented managers operating Berkshire’s subsidiaries.

In discussing his will, Buffett said that whenever he changes it, he has his kids read it first before he signs it. He says he often gets good feedback from his children and makes modifications.

He felt the worst time for kids to initially read a father’s will is after the father has died; no modifications can be made then.

And as far as rich people go, Buffett said he’s known many wealthy people who died with no friends. However, he said people who are kind never die without friends.

I’m not sure how much longer we’ll have these annual meetings with Warren leading them.

But while it lasts, it’s the best annual meeting in the country. I pinch myself for having been able to learn so much from Warren and Charlie for so long. Who would have thought they’d still be living and guiding my investment thinking into my 60s?

I’ll be sad when Warren is gone, but I won’t sell on the news. And, if the stock drops (which is not a sure thing), I might find a way to buy more.

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Sonia Chung
Sonia Chung
Sonia Chung joined the Orange County Business Journal in 2021 as their Marketing Creative Director. In her role she creates all visual content as it relates to the marketing needs for the sales and events teams. Her responsibilities include the creation of marketing materials for six annual corporate events, weekly print advertisements, sales flyers in correspondence to the editorial calendar, social media graphics, PowerPoint presentation decks, e-blasts, and maintains the online presence for Orange County Business Journal’s corporate events.
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