Multibillionaire investor Warren Buffett hosted Berkshire’s highly-anticipated annual shareholder meeting on May 2, 2020. And it was conducted exclusively online for the first time in the company’s history, due to stay-at-home orders related to the spread of Covid-19. Among the top takeaways: Buffett, who is Berkshire’s chairman and chief executive, expressed faith in the U.S. economy in the face of the virus, but nevertheless announced Berkshire had sold off its entire portfolio of airline stocks, worth billions of dollars. 

Here are the biggest takeaways from the meeting: 

• Berkshire Hathaway sold its entire holdings in airline stocks. The company reportedly owned 10% of Southwest, Delta, American, and United Airlines, jointly worth about $6 billion. Buffett said that it would likely take years for the airline industry to recover from the steep decline in air travel, down about 95% for the year. 
• The sale added to Berkshire’s liquidity. The company holds $137.3 billion in cash.
• Despite the company’s growing cash pile, Berkshire Hathaway hasn’t made any big acquisitions recently. While Buffett didn’t rule out making any big deals in the future, he said that the company hasn’t encountered any deals it wants to pursue..  
• Berkshire Hathaway reported a record net loss of nearly $50 billion for the first quarter of 2020, compared to the $21.7 billion of profit in the first quarter of 2019. In light of the health and financial impacts of the coronavirus, Buffett appeared to demonstrate optimism. Buffett compared the pandemic to past problems such as 9/11, World War II, and the 2008 recession that the U.S. has encountered and overcome, and he said he put his faith behind the “American miracle” to recover from the effects of the virus.
• Buffett also discussed the insurance industry, where Berkshire has a large presence. He said he expects insurance companies to face lawsuits from customers over losses caused by the pandemic. Berkshire Hathaway owns the home and car insurance company Geico, as well various underwriting and indemnity companies. 
• Buffett said once again, as he did in his February, 2020 letter, that he and Berkshire Vice Chairman Charlie Munger are both in good health. Munger is 96 years old and Buffet is 89 years old.

More on Warren Buffett and Berkshire Hathaway

Buffett started out small, working a paper route as a boy in Nebraska, and holding various odd jobs, until he eventually bought a struggling Massachusetts cloth mill called Berkshire Hathaway in 1962.

Much of Berkshire Hathaway’s success has been based on Buffett himself, who built the company from a struggling cloth spinning company, to its current gargantuan size. Buffett is currently worth $87.5 billion.

Berkshire Hathaway owns many well-known companies including: 

*Source: Berkshire Hathaway

Follow the Stash Way 

If you’re inspired by Warren Buffett, you can get started investing with any amount on Stash.

And remember that even in times of market volatility and uncertainty, it’s best to follow the Stash Way, if you’re able to, by investing small amounts regularly in a diversified portfolio.

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On February 22, 2020, Buffett delivered his annual letter in which he discusses the annual performance of his company Berkshire Hathaway and its future. Buffett also urged investors to pay closer attention to company operations and less on short-term earnings. Here are highlights from the letter. 

The new accounting rule

Berkshire Hathaway earned $81.4 billion in 2019, which includes $53.7 billion in net unrealized capital gains in the stocks owned by the company. However, Buffett warned against a new accounting rule which requires companies to disclose unrealized capital gains and losses. 

An unrealized gain is when an investor owns stock in a company whose stock rises, but does not sell that stock. In contrast, a realized gain is when the stock rises and the investor sells, thereby locking in his gains. An unrealized loss occurs when a stock falls, and the investor doesn’t sell. 

Rather than focus on earnings that include unrealized gains and losses, Buffett urged shareholders to focus on operating earnings. Operating profit is the profit a company makes, excluding income from investments and derivatives, which are contracts between buyers and sellers based on an underlying stock, bond, or some other asset. Berkshire Hathaway saw $24 billion in operating earnings in 2019. 

The rules of buying a business

Buffett also explained that an important part of his approach to business is investing in and acquiring other businesses. The CEO revealed the three qualifications he seeks in a company when he considers purchasing it.

• The business must earn “good returns” on the money it requires to function.
• The business must be run by “able and honest managers.”
• The business must be reasonably priced.

Buffett said that it is rare for a company to meet all those standards. Berkshire Hathaway did not buy a major company for the third year in a row, according to Business Insider. 

In addition to companies that Berkshire owns outright, it is a major shareholder in Apple, American Express, and Delta:

Source: Berkshire Hathaway

You can loosely follow Buffett’s rules when you’re researching stocks and ETFs in which you want to invest.

Company leadership

On what makes a good board of directors, Buffett emphasized the importance of business experience, and emphasized his own directorship at 21 different companies over the course of his career. While Buffett celebrated the increased presence of women in boardrooms since the 1960s, he also said that this advancement remains a “work in progress.”

Buffett also explained the challenges of finding the right people to sit on a board of directors. He wrote: “we will continue to look for business-savvy directors who are owner-oriented and arrive with a strong specific interest in our company.”

Buffett also mentioned that different directors can bring different skills to the table, joking that he would never participate in Dancing with the Stars.

The future and potential successors

Finally, Buffet broached the subject of his age and the age of his business partner Charlie Munger and potential successors. Buffett is 89 years old and Munger is 96 years old. 

The CEO assured shareholders that Berkshire Hathaway has a plan for life after Buffett and Munger and that he trusts company leadership to lead the company when he decides to step down from his position. 

Buffett also alluded to a couple of different possible successors, including Ajit Jain and Greg Abel.

More background on Warren Buffett and Berkshire Hathaway

Buffett started out small, working a paper route as a boy in Nebraska, and holding various odd jobs, until he eventually bought a struggling Massachusetts cloth mill called Berkshire Hathaway in 1962.

Much of Berkshire Hathaway’s success has been based on Buffett himself, who built the company from a struggling cloth spinning company, to its current gargantuan size. Buffett is currently worth $87.5 billion.

Berkshire Hathaway owns many well-known companies including: 

*Source: Berkshire Hathaway

If you’re inspired by Warren Buffett, you can get started investing with any amount on Stash. 

With Stash, you can purchase fractional shares of stock in companies including Berkshire Hathaway.

You can learn more about all of the ETFs and single stocks that Stash offers.

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His solution? Hold steady and keep looking for deals.

“Our advice?… [Pay] little attention to gains or losses of any variety,” Buffett writes in his most recent annual shareholder letter, which he published on February 23, 2019.

Buffett is considered one of the most experienced investors around, having amassed a net worth of nearly $87 billion. His annual letter is a much-anticipated event, which investors pay attention to for indications about market trends and for guidance regarding what to do with their money.

Here are some highlights from the letter and annual report.

Berkshire Hathaway’s annual report: The highlights

• Berkshire Hathaway earned $4 billion in 2018.
• The company lost $25 billion in the fourth quarter of 2018, due to stock market volatility.
• Roughly $3 billion of Berkshire’s fourth-quarter losses were related to its stake in the ketchup and mayonnaise maker Kraft-Heinz. Kraft posted large losses in the fourth quarter of 2018, due to a reduction in the value of its Kraft and Oscar-Meyer businesses, as well as a Securities and Exchange Commission (SEC) probe into its accounting practices, according to reports.
• The company used its savings from the 2017 tax cuts to repurchase $418 billion of its own shares. Generally speaking, that tax cut reduced the U.S. corporate tax rate to about 21%, about half the previous rate, saving businesses money.

Good to know: When a company repurchases its own shares, it reduces the number of shares that are available for investors to buy in the market. A stock repurchase, or buyback, tends to drive up the price of a company’s stock, because there are fewer shares.

• Buffett said he and business partner Charlie Munger, the company’s vice chairman, are on the hunt for an “elephant sized” acquisition—meaning that Berkshire is seeking to purchase a very large company. In addition to owning outright companies such as Duracell and Fruit of the Loom, Berkshire owns sizable stakes in many other U.S. corporations, including American Express, Apple, Coca Cola, and Wells Fargo.

Berkshire hasn’t made a big acquisition of another company since 2015, when it purchased an aerospace parts maker called Precision Castparts Corp. for $32 billion.

More About Warren Buffett, the Oracle of Omaha

Buffett is known as the Oracle of Omaha because Berkshire Hathaway is headquartered in Omaha, Nebraska and because he has made smart stock picks over a nearly 60-year career. He built Berkshire Hathaway from a small cloth mill and manufacturer in New England, to a multi-billion dollar enterprise whose market value has increased 2.4 million percent since the 1960s, according to the company’s most recent annual letter.

Invest with Stash

Warren Buffett started small, and so can you. With Stash, you can invest in dozens of funds and single stocks, and you can get started for as little as $5.

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But now, instead of buying shares of another company, Berkshire seems to be taking a bet on itself by purchasing approximately $1 billion worth of its own stock.

Confused? We explain it:

Why is Berkshire Hathaway buying its own shares?

After ten years of a bull market and ever-increasing stock prices, Buffett is buying his company’s own shares because he doesn’t see value anywhere else, according to some industry experts.

Berkshire has shown some eye-popping profits this quarter. It’s reported that profits increased 351% to $18.5 billion compared to the same quarter a year ago. (In recent months, however, its earnings have suffered from a change in accounting rules that require it to book losses for stocks it owns but does not sell.)

Buffett doesn’t take crazy bets on the companies or stock he buys. He’s known as a value investor—buying companies like Duracell or Benjamin Moore paints, or taking large positions in big companies whose stock price is relatively low, and that he thinks will increase in value over time.

For example, it has enormous stock ownership positions, worth billions, in dozens of well-known public companies.

The last time Berkshire Hathaway repurchased its own stock was 2012, according to reports, and it hasn’t made a big acquisition of another company since 2015, when it purchased an aerospace parts maker called Precision Castparts Corp. for $32 billion.

Buffett is one of the wealthiest investors in the world, worth an estimated $90 billion.

Wait, what’s a stock buyback?

A stock buyback is when a public company buys its own shares on the stock market.

Companies buy their own shares for several reasons: One is to boost the value of their own company shares. Think about it in terms of your old economics classes, when you learned about supply and demand. When there is less of something that people want, the price of that something increases.

Companies have increasingly bought their own shares in recent years as a way to reward their own investors. As they buy back their shares, it tends to increase the value of the outstanding shares.

You can invest in any of our curated individual stocks and themed ETFs, starting with $5.

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So, where can you turn when you want some sort of direction? Why not look to one of the most successful investors of all time—Warren Buffett?

Who is Warren Buffett, and why should you listen to him?

Warren Buffett is a businessman and investor from Omaha, Nebraska, who has served as the chairman and CEO of the holding conglomerate Berkshire Hathaway since the 1960s. He’s also one of the richest people in the world, with a net worth estimated to be more than $80 billion.

Buffett’s is best known for his investing activity, which has earned him a fortune, and the nickname the “Oracle of Omaha.” Over the years, Buffett bread-and-butter method is to find “diamond in the rough” companies, buy or invest in them at a discount, and letting them appreciate.

Examples include investments in razor blade manufacturer Gillette, See’s Candies, and Coca-Cola.

Buffett’s guidance is followed closely by millions of people. When Buffett (or, by proxy, Berkshire Hathaway) buys or sells a specific stock, it can cause a ripple-effect in markets as other investors mimic his moves.

Warren Buffett’s most valuable investing lessons

If you want to invest like Buffett, you’ll want to stick to his script. Luckily, he lays out his magic formula in Berkshire Hathaway’s annual letters. In the 1977 letter, Buffett actually laid out his investment criteria (for stocks) in simple terms, mostly buying up promising companies at a discount, and watching them appreciate. So, if you want to roll like Buffett, here are the basic investing principles and guidelines to consider when buying stocks.

1. You understand the company.

If a company is engaging in a business you don’t understand, it may be wise to invest elsewhere. Do your research, of course, but if you’re uncomfortable investing in something you don’t understand, go with your gut and avoid it.

2. The company shows long-term promise.

Buffett writes that he wants a business to have “favorable long-term prospects,” and you should consider those prospects when investing. Again, do some research and ask yourself some questions.

For example, is a brick-and-mortar retailer a smart investment with the industry gravitating to the digital world? Consider what advantages a company has over others in its sector, and what new technologies, services, or products people will want in five, ten or twenty years, and which companies may be in a position to offer them.

3. You trust the company’s leadership.

You don’t want to get stuck holding shares of the next Enron. Research the company’s leadership team, and determine whether you find the team trustworthy and competent.

4. The price is right.

Buffett writes that he likes stocks that are “available at a very attractive price.” Obviously, you can’t predict whether a stock will increase or decrease in value, but you can research a stock’s history to try to judge how well it’s valued.

Read more: Growth vs. Value Stocks, A Quick Guide

Warren Buffett’s investing principles and Stash

Warren Buffett managed to stick to his investing principles all these years, and his method has proven successful. We’ve developed our own set of criteria, which we call The Stash Way, that embodies some of the same ideas.

These are the guidelines:

• Invest for the long-term
• Invest regularly
• Diversify

Pair these principles with Buffett’s advice, and your portfolio should be in good shape.

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On July 6, Zuckerberg edged past Buffett, the founder of business conglomerate Berkshire Hathaway.  (Find out more here).

The three richest people globally are now all founders of tech companies. Amazon founder Jeff Bezos is the wealthiest person in the world, with a fortune estimated at $143 billion. Following Bezos is Microsoft founder Bill Gates, whose personal wealth is estimated at $93.4 billion.

What’s net worth?

In simplest terms, net worth is what you own, after you’ve subtracted what you owe. In addition to Facebook stock, Zuckerberg reportedly owns $200 million in real estate and $2.5 billion in cash.

Value vs. growth

Buffett, 87, has long been known for his skill picking company stocks and investing in companies that increase in value over time.

Buffett built Berkshire Hathaway from a struggling cotton mill and cloth spinning company he purchased in 1962, into a conglomerate that owns dozens of companies. The company’s stock has increased a staggering 1.8 million percent over the last 50 years.

Berkshire Hathaway is what’s known as a value company because the companies it owns or invests in can often be undervalued compared to similar companies in the market. Investors, such as Buffett, try to invest in these companies before their share price increases.

Facebook, founded by Zuckerberg from his Harvard University dorm room in 2004, is a very different kind of company.  It’s what’s known as a growth company, because its employee size, revenue, and stock price have grown very quickly since the founding.

More background

Zuckerberg’s wealth increased by nearly $9 billion this year, according to news sources. Bezos’ wealth has increased by more than $50 billion since last summer.

Both Buffett and Zuckerberg have pledged to give away most of their wealth to charity over time.

As with any type of investing, choosing between value and growth investing largely comes down to assessing the trade-off between the risk and the expected performance.  Generally, a growth strategy is a style of investing that focuses on companies that have the potential to grow their earnings at a high rate, while a value strategy is a style of investing that focuses on companies that may be priced below their actual value.

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Berkshire is one of the best-known conglomerates in the business world, led by Warren Buffett, perhaps the most famous investors in the world.

Buffett, its chief executive,  is known as the “Oracle of Omaha” for his stock picking abilities.

This year, as he does every year, he spoke candidly about how Berkshire has been doing over the last year.

But in a surprise to some, the company reported a loss of more than $1 billion for the first quarter of 2018, its first loss in nine years.

What sparked Berkshire Hathaway’s losses?

The losses stem in part from swings in the stock of two of Berkshire’s biggest holdings, Coca-Cola, and Wells Fargo, and a new accounting rule that requires companies to account for losses even though they may be unrealized.

We’ll explain what that means in a second, but here’s what Buffett had to say about that in his annual letter:

“The new rule says that the net change in unrealized investment gains and losses in stocks we hold must be included in all net income figures we report to you. That requirement will produce some truly wild and capricious swings in our GAAP bottom-line. Berkshire owns $170 billion of marketable stocks (not including our shares of Kraft Heinz), and the value of these holdings can easily swing by $10 billion or more within a quarterly reporting period. Including gyrations of that magnitude in reported net income will swamp the truly important numbers that describe our operating performance. For analytical purposes, Berkshire’s ‘bottom-line’ will be useless.”

Quick explainer: What’s an unrealized loss?

An unrealized loss is when an investor owns stock in a company whose stock falls, but does not sell that stock. In contrast, a realized loss is when the stock falls, and the investor sells, thereby locking in his losses.

Berkshire is one of the best-known conglomerates in the business world, led by Warren Buffett

In Berkshire’s case, it did not sell off its position in the stocks that lost money. Nevertheless, it had to account for the losses in its financial statements. (Other losses stemmed from payouts related to its insurance businesses, as three hurricanes caused billions of dollars of damage in the South last year, Buffett writes in his letter.)

Buffett to investors: Look at our operating profits

Buffett called the new accounting rule a “nightmare,” and urged investors to look at the company’s operating profit, which increased 49% to $5.3 billion. Operating profit is the profit a company makes, excluding income from investments and derivatives, which are contracts between buyers and sellers based on an underlying stock, bond, or some other asset.

What else did Warren Buffett talk about?

Berkshire-Hathaway is a huge conglomerate, comprising dozens of business including well-known names such as battery maker Duracell, See’s Candies, and Fruit of the Loom underwear, not to mention car insurer Geico and other home and specialty insurance carriers.

It also has enormous stock ownership positions, worth $170 billion, in dozens of well-known companies including American Express, Apple, Bank of America, and Coca-Cola.

At the meeting, Buffett and his vice chairman and business partner Charlie Munger, had some positive words for numerous companies whose stock the company holds.

Buffett was thumbs up on Apple. In February, Berkshire increased its ownership of Apple shares to a stake worth more than $28 billion, and it recently upped its stake in the iPhone maker to nearly $44 billion, according to reports. And on Saturday, Buffett said he was glad to see Apple buying back $100 billion worth of its shares.

“I’m delighted to see [Apple] repurchasing shares,” Mr. Buffett said, according to the New York Times. “We own 5 percent of it. With the passage of a little time, we may own 6 or 7 percent because they repurchase shares.”

In addition to Apple, Buffett also reportedly talked about tech companies Microsoft, Google parent company Alphabet, and Amazon. In particular, he noted the miraculous success Amazon has had over the years.

He had good things to say about Wells Fargo. This came as a surprise to many investors, because the bank has lurched from scandal to scandal for years, including illegally signing up customers for fake bank and credit card accounts.

“All the big banks have had troubles of one sort or another,” Buffett told the room, according to the Wall Street Journal.  “And I see no reason why Wells Fargo as a company, from both an investor standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes.”

Negative word for cryptocurrencies, such as Bitcoin, calling them a breeding ground for charlatans, and said they will “come to bad endings,” he said, according to reports.

What else is happening at Berkshire Hathaway?

Buffett who is 87, is expected to step down from overseeing Berkshire in the coming years. His co-founder, Munger, 94, is expected to take his leave as well.

Buffett made two high-profile promotions in January that experts say indicate who will take over the company. He made Gregory Abel, 55, vice chair of the company’s non-insurance businesses, according to a company press release. Abel currently heads up Berkshire Hathaway Energy. He also promoted Ajit Jain, 66, to be vice chair of the company’s insurance group. Jain is the executive vice president of Berkshire’s National Indemnity Company, the release says.

Both executives, who have been at Berkshire Hathaway for decades, were also named directors of the company’s board, which increased in size to 14 people from 12 to accommodate the new members.

How did Warren Buffett become Warren Buffett?

Buffett started out small, working a paper route as a boy in Nebraska, and holding various odd jobs, until he eventually bought a struggling Massachusetts cloth mill called Berkshire Hathaway in 1962.

Much of Berkshire Hathaway’s success has been based on Buffett himself, who built the company from a struggling cloth spinning company, to its current gargantuan size.

In fact, the company’s stock has increased a staggering 2.4 million percent over the last 50 years. Buffett is worth an estimated $85 billion.

Check out all of our available investments on Stash here.

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