Value Investing Takeaways from Berkshire Hathaway’s Annual Meeting

Tom Putnam & Joan Hampel at the Berkshire Hathaway Annual Meeting

Tom Putnam & Joan Hampel at their final destination, the Berkshire Hathaway Annual Meeting

Every year Fenimore Asset Management’s Investment Research Analysts, and various associates, attend Berkshire Hathaway’s Annual Meeting to hear unique insights from both Warren Buffett and Charlie Munger. As value investors ourselves, we want to highlight a few key themes that were underscored during the Annual Meeting that echo our value investing ethos here at Fenimore.

Avoiding Envy
Mr. Buffett stated that one of the tenets to successful investing is avoiding envy. Investors shouldn’t envy the individual who may have bought shares in a company’s initial public offering or invested in enterprises that operate in speculative markets. The key is to look for investments that make sense and buy stock in a business in which you feel comfortable to own long term.

He affirms that, “A lot of problems are caused by envy. You want to figure out what makes sense and follow your own course.” Here at Fenimore we believe too much emphasis is put on what an investor should do today to generate activity causing many to chase performance and jump from one investment to the next. Facts reinforce that most investors achieve better returns if they stick to their plan and focus long term.

Knowing Limits & Avoiding Self-Destructive Behaviors
Additionally, Mr. Buffett spoke to the importance of knowing one’s investing limits, “It’s important to know what you can’t do. We try to take swings in our own strike zone. It doesn’t take a genius to do it, but we’ve generally managed to avoid self-destructive behavior.” At Fenimore we believe that investing in a select number of financially durable, well-run businesses at the right price is the key to outpacing inflation and building real wealth over the long term.

Political Landscape
A question was asked of how the United States shall fair in the upcoming election and political aftermath. Mr. Buffett stated that America will continue to do fine no matter the policies or political parties it’s operating under. He said, “In the end, business in this country has done extraordinary well for a couple hundred years. It has adapted to society and society has adapted to business. The country is headed in the right direction, and will continue to improve.” Moreover, he reaffirmed that in terms of the economy, “No presidential candidate or president is going to end it. They can shape it in ways that are good or bad but won’t truly throw it off course.” We too have reiterated this over the years including in a recent newsletter.

Bottom-Up Investment Approach
Lastly, Charlie Munger stated, “Microeconomics is what we do, macro is what we have to put up with.” When we value investments Fenimore does not try to make macroeconomic predictions or time the market. Our strength is our systematic, low turnover, disciplined approach. We identify quality businesses that are positioned to increase their intrinsic value and then purchase shares in them at attractive prices. Fenimore’s bottom-up investment approach allows for this investment reality to coalesce.

 

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