Warren Buffett talks Apple, AI, Paramount, and more

The Berkshire Hathaway (BRK-A, BRK-B) annual shareholders meeting on Saturday was the first in a new era for the conglomerate.

Saturday’s meeting marked the first time CEO Warren Buffett took questions from shareholders following the death of Berkshire Hathaway vice chairman Charlie Munger late last year at the age of 99.

In his annual letter to Berkshire shareholders, Buffett called Munger the “architect” of the modern Berkshire Hathaway, which takes its name from a now-defunct textile company in New England and has grown to be the largest conglomerate in the S&P 500 (^GSPC).

For the first time, non-shareholders were also able to watch the annual shareholders’ movie, which featured a montage of some of Munger’s best punchy quotes through the years, as well as some of the celebrity cameos that have been featured in these movies.

Buffett, along with Berkshire vice chairs Greg Abel and Ajit Jain, took several hours of questions from shareholders.

In the early going of the Q&A, Buffett discussed the company’s decision to pare its holdings of Apple (AAPL) during the first quarter, saying that while the company did sell shares, it is, in his view, “extremely likely” that the company will remain its largest equity investment at the end of the year.

As expected, Buffett fielded several questions about artificial intelligence and the impact it could have on Berkshire’s portfolio or other considerations for investors. Buffett said time and again he is no AI expert, at one point characterizing himself as someone who “doesn’t understand a damn thing about it.”

Still, Buffett analogized the advent of the AI boom to the discovery of the nuclear bomb on more than one occasion, saying these two technologies are proverbial genies that cannot be put back in the bottle.

As for the company’s growing pile of cash and Treasury holdings, Buffett said it is likely the value of these holdings will exceed $200 billion during the current quarter, noting he’s “quite satisfied” with the position.

Asked about Berkshire’s appetite for increasing investments overseas, and in China specifically, Buffett said, “Our primary investments will always be in the United States.”

On succession, Buffett said Abel should be in charge of directing Berkshire’s investments after his passing. Abel is set to take over as Berkshire CEO after Buffett; investment managers Todd Combs and Ted Weschler joined the company over a decade ago and have contributed to many changes within Berkshire’s equity portfolio over those years.

Toward the end of the proceedings, Buffett spoke about Federal Reserve policy for the first time, suggesting to shareholders that the US government’s accumulated deficit garners more of his attention than Fed policy.

At the conclusion of the Q&A session, Buffett left the audience with a last bit of wit — “I not only hope that you come next year, but I hope I come next year.”

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    ‘That’s an interesting question’

    Warren Buffett loves index funds.

    In his 2016 letter to shareholders, he wrote: “If a statue is ever erected to honor the person who has done the most for American investors, the hands-down choice should be [Vanguard founder] Jack Bogle.”

    Accordingly, Buffett has recommended most investors put most of their money in index funds that track the broader market. And that includes family.

    On Saturday, Buffett was asked by a shareholder who submitted a question to CNBC’s Becky Quick about his prior comments that he has 90% of his wife’s inheritance in a low-cost S&P 500 index fund.

    The shareholder, specifically, wanted to know whether the current weighting of tech companies within the index would move Buffett to consider shifting this allocation to something like an equal-weighted index fund, which is what the name implies: a fund that holds all members in the S&P 500 in an equal proportion, rather than proportionally by size, the way the index is constituted.

    Last fall, as the S&P 500 stumbled and Wall Street strategists offered views on what was next for the market, strategists were arguing for the merits of a position in the equal-weighted index given the run the “Magnificent Seven” had had to that point.

    Fast forward six months, and the market is in much the same place.

    In response to the question on Saturday, Buffett simply said: “That’s an interesting question.”

    Of course, Buffett’s responses are never (quite) that brief. And, in the end, Buffett noted he’s made no recommended investment changes amid regular revisions of his will.

    Buffett added that given how much money his wife is set to inherit, it doesn’t matter whether she outperforms the S&P 500 or not. “The main thing is that she feels she’s in a financial position …that she doesn’t even need to think about it,” Buffett said.

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    Warren Buffett took a bath in Paramount — he owns up to it

    Paramount (PARA) was a bad investment for Berkshire Hathaway (BRK.A BRK.B), one made fully by Warren Buffett.

    “It was 100% my decision,” Buffett acknowledged. He noted Berkshire has sold out of Paramount.

    “I lost money, and I did it all by myself,” Buffett added.

    Paramount shares are down 44% in the past year.

    The company is now locked in a takeover battle that could be coming to an end soon.

    Paramount shareholder and Ariel Investments founder John Rogers told Yahoo Finance (video below) this week that he fully supports the $26 billion offer reportedly put forth by Apollo (APO) and Sony (SONY). The other bidder includes studio outfit Skydance.

    (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

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    ‘We just haven’t seen anything that makes sense’

    In the closest thing we’ve gotten today to a macro comment on the market from Warren Buffett, the Berkshire CEO said when asked about why the company has been so cautious around new opportunities: “We just haven’t seen anything that makes sense.”

    Some of the main themes to emerge from Saturday’s meeting — in addition to the absence of Charlie Munger — were Berkshire’s decision to pare its holdings in Apple (AAPL) during the first quarter and Buffett’s lack of enthusiasm for new opportunities.

    Having gone many years without a splashy acquisition to add to the Berkshire portfolio, Buffett said this has not been a time when the phone has been ringing off the hook.

    Back in his 2014 annual letter to Berkshire shareholders — which followed a particularly acquisitive run for Berkshire, after which Buffett said the firm owned nine-and-a-half of the firms that would be listed in the Fortune 500 — Buffett wrote: “Our lines are out.”

    The next year, Berkshire bought Precision Castparts for $37 billion. The company has not made a sizable acquisition since.

    Moreover, the company’s biggest outlay of capital toward any idea in the nearly decade since the Precision deal has been its purchases of Apple stock.

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    It’s going to be Greg Abel’s show post Buffett

    A big vote of confidence for Buffett’s successor, Greg Abel.

    In response to a question, Buffett said Abel will have the final say over Berkshire’s (BRK.A BRK.B) stock portfolio.

    “He understands businesses,” Buffett said of Abel. “The responsibilities should entirely be with Greg.”

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    Buffett sends a reminder to Elon Musk on selling auto insurance

    Tesla (TSLA) CEO Elon Musk hasn’t hidden his desire to be a big player in the auto insurance industry.

    However, Warren Buffett, CEO of GEICO owner Berkshire Hathaway (BRK.A BRK.B), offered up this dose of wisdom at the annual shareholder meeting when asked about Tesla and insurance:

    “Insurance always looks easier than it is. It’s so much fun because you get the money at the start, you know, and then you find out that you’ve done something stupid later on. But it’s a very tempting business when somebody hands you money, and you hand them a little piece of paper.”

    Added Berkshire’s insurance chief Ajit Jain: “Tesla has been toying with the idea of writing insurance directly — it hasn’t been much of a success.”

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    A reflective Warren Buffett takes the mic in Omaha

    This year’s Berkshire Hathaway annual shareholder meeting has so far featured a very reflective Warren Buffett.

    With Saturday marking the first Berkshire annual meeting since Charlie Munger’s passing in November, the absence of Buffett’s long-time right hand man has, as one would expect, influenced the proceedings.

    As Yahoo Finance’s Seana Smith reported from inside the building in Omaha, Saturday is a “tough day” for Berkshire shareholders.

    But Munger’s absence has been felt in more ways than one.

    Buffett, at one point, turned to Charlie for his input on an answer, only to catch himself and earn a cheer from the audience

    Buffett also regaled the audience with a tale of the two stocks former vice chair Charlie Munger argued most forcefully Berkshire needed to buy — BYD (BYDDY) and Costco (COST) — and conceded he didn’t listen enough on the latter.

    Longtime shareholders can likely insert their own imagined Munger one-liner in response. Without Munger’s presence, Buffett’s reflection more clearly lingered over the proceedings.

    And while it is not breaking news that an executive approaching his mid-90s might be reflecting more than forecasting, Buffett’s overall tone Saturday is one that has been far more explicit about both his limitations today and his future inability to remake Berkshire Hathaway.

    Buffett noted that, at the age of 93, he doesn’t operate “at the same level of efficiency” as he did a few decades ago. The Oracle of Omaha quipped he likely won’t be signing any 4-year employment agreements.

    On AI, Buffett offered a view that some of his experiences with the technology have made him nervous.

    But said, in the end, “As someone who doesn’t understand a damn thing about it, it has enormous potential for good and an enormous potential for harm.”

    Asked by shareholders about future investments in China, Canada, and India, Buffett offered similar versions of a view that he held a limited view of what could one day be possible.

    Buffett noted that American companies would likely always be the most prominent part of Berkshire’s portfolio. How the percentages may change will, Buffett knows, not be his call in the decades ahead.

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    Florida ‘believes in the free market more’ than other states with insurance problems

    Insurance rates nationwide, across policy types, have soared in recent years.

    And no state has seen more turmoil than Florida.

    Asked Saturday about the condition of the Florida insurance market, Berkshire Hathaway vice chair Ajit Jain, who runs the conglomerate’s sprawling insurance operations, said the state’s insurance markets have had “a few tough years.”

    Citing challenges with the state’s legal system and storms that have caused considerable damage in the state in recent years, Jain said the state has been one where it has been “very difficult for a risk-bearer to make money.”

    In March, auto insurance rates in the US rose 22.4% over the prior year, the most in 47 years. The average auto insurance premium in Florida now stands north of $2,900 a year, the third-most expensive in the country.

    Jain also noted that Florida is a market currently subsidized by the rest of the country — meaning that, on balance, as a state with a higher rate of more expensive claims, insurance operators in Florida make up these costs by collecting premiums in less volatile markets — but said this dynamic won’t “stand the test of time.”

    Longer-term, though, Jain appears optimistic about the market, saying: “I hope Florida will be a fairly buoyant insurance market. Because at the end of the day, they do believe in the free market more than some of the other states that have [an] insurance crisis, like California and New York.”

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    Ahead of Apple’s AI releases soon…

    With Apple (AAPL) CEO Tim Cook and Microsoft (MSFT) co-founder Bill Gates in the room, Warren Buffett strikes a cautious tone on AI.

    He said he had an experience with AI that made him very “nervous.”

    He saw an image “in front of his eyes”, of him and his voice and wearing his clothes and delivering a message “no way from him.”

    “If I was interested in investing in scamming, [AI] is going to be the growth industry of all time. … Obviously, AI has potential for good things too. … As someone who doesn’t understand a damn thing about it, it has enormous potential for good and an enormous potential for harm,” Buffett said.

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    The 2 stocks Charlie Munger told Warren Buffett he had to buy

    BYD (BYDDY) and Costco (COST).

    Those are the two stocks Warren Buffett told Berkshire Hathaway shareholders on Saturday that Charlie Munger argued hardest for in their years together.

    “Charlie twice pounded the table with me and said, ‘Buy, buy, buy.’ BYD was one of them and Costco was the other,” Buffett told shareholders. “I should’ve been more aggressive in Costco.”

    “It wasn’t fatal that we weren’t,” Buffett added. “But [Charlie] was right, big time, in both companies.”

    Buffett’s answer came in response to a question from a shareholder about what it would take for the company to increase its investments in China. Currently, EV maker BYD is the company’s only investment in the country.

    Buffett said: “Our primary investments will always be in the United States.”

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    Warren Buffett’s next big deal probably won’t come from overseas

    Warren Buffett is sitting on gobs of cash at Berkshire (BRK.A BRK.B), but don’t expect any large deal to come from overseas.

    Buffett reiterated his love for investing in America:

    “You won’t find us making a lot of investments outside of the United States, though we’re participating through these companies in the world economy. I understand the United States rules, weaknesses [and] strengths…. I don’t have the same feeling generally around the world. And the lucky thing this is that I don’t have to.”

    Buffett did reaffirm his commitment to investing in Japan, however.

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    Warren Buffett quiets Apple concerns

    As Myles Udland points out above, Berkshire (BRK.A BRK.B) sold some Apple (AAPL) shares in the first quarter.

    Buffett moved quickly to quiet concerns on the tech giant, saying this on if his views on Apple have changed:

    “No but we have sold shares. … At the end of the year, I would think it extremely likely that Apple is the largest common stock holding we have now. … Charlie and I looked at common stocks … as being businesses, so when we own a Dairy Queen or whaetever it may be, we look at that as a business. … We always look at every stock as a business.”

    Buffett later compared Apple to long-time holdings American Express (AXP) and Coca-Cola (KO), noting Apple will be a holding when Greg Abel takes over.

    Yahoo Finance’s Michael Kelley contributed to this post.

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    If Warren Buffett is worried about the country’s debt position…

    It doesn’t show on Berkshire’s (BRK.A BRK.B) cash and Treasury bill line on the balance sheet.

    Berkshire disclosed it holds cash and T-bills of $182 billion at first quarter end. Buffett told shareholders the number could reach $200 billion at the end of the second quarter.

    Concerns about the country’s debt has started to pick up on Wall Street.

    Below is what Bank of America (BAC) CEO Brian Moynihan told Yahoo Finance about our country’s debt.

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    Warren Buffett’s elevator pitch for being a Berkshire Hathaway shareholder

    In case you ever need this fodder at a cocktail party…

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    Berkshire insurance ops shine, but won’t be repeated this year

    A major driver of Berkshire’s $11.22 billion in operating profit in the first quarter came from the company’s insurance operations, which totaled $5.2 billion in the first quarter.

    In a discussion of the company’s first quarter results, Buffett said Ajit Jain, who leads Berkshire’s insurance operations, “wants me to point out to everyone that you cannot take the insurance earnings of the first quarter and multiply by four. It just doesn’t work that way in insurance.”

    The company’s insurance risks are spread across geographies and disaster types, but Buffett noted that a major storm along the East Coast of the US would probably be the biggest risk for the firm. Hurricane season in the Atlantic runs from June through November.

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    Berkshire pays tribute to Charlie Munger

    For the first time, Berkshire Hathaway made its annual shareholder video — which precedes the Q&A session at the annual meeting — on Saturday, which featured a compilation of Charlie Munger and some of his best one-liners, a fixture at annual meetings and in other public appearances.

    Munger died in Nov. 2023 at the age of 99.

    One the Mungerisms featured in the movie included Munger telling an earlier shareholder meeting: “If I can be optimistic when I’m nearly dead, surely the rest of you can handle a little inflation.”

    Elsewhere, Munger added: “The right way to make decisions in practical life is based on your opportunity costs. When you get married, you have to choose the best that will have you. And the rest of your life is the same damn way.”

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    Berkshire posts record operating profit as Apple drags on investment gains

    Ahead of Saturday’s annual shareholder meeting, Berkshire Hathaway reported first quarter earnings that showed a record operating profit of $11.22 billion.

    In the first quarter of last year, operating profits at Berkshire tallied $8.1 billion.

    The company’s investment gains, however, were down sharply from the prior year period, tallying just $1.48 billion against some $24.75 billion last year.

    Apple’s (AAPL) roughly 10% decline in the first quarter weighed on results here, with the tech giant accounting for around 40% of Berkshire equity holdings.

    In its first quarter report, Berkshire also disclosed it lightened up its Apple holdings during the first quarter. At the end of 2023, the value of Berkshire’s Apple position stood at $174.3 billion; at the end of Q1, this position’s value stood at $135.4 billion.

    At last year’s annual meeting, Buffett took time, however, to emphasize to investors that this stock does not actually comprise this percentage of Berkshire’s overall portfolio, which includes its other fully-owned subsidiaries.

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