How does Berkshire transform, is it overweight A shares?Shareholders talk about Buffett’s general meeting
On the morning of May 3rd, the feast of the investment circle ended with the annual Buffett General Meeting of Shareholders.Buffett is hailed as a stock god, and his shareholder meeting is regarded by many as the vane of investment, and has attracted much attention.Sauna Night Network invited Berkshire shareholder Chen Kaifeng, chief economist of Horizon Financial of the United States, to make a video connection, bringing first-hand shareholder meeting sharing and analysis.The following is a live broadcast of dry goods: Sauna Night Net: The most impressive thing about this meeting?Kaifeng Chen: It must be selling aviation stocks. In fact, when he first invested in the aviation industry, he also suffered a huge loss in the aviation industry, and the third time (that is, this time) he began to invest in 2016 and 2017. At that time, he thought that the aviation industry had experienced dozens ofYears of companies continue to integrate and merge, monopolies will appear after mergers and acquisitions, competition will decrease, and ticket prices will also increase, so he entered the investment market.Of course things are as he expected. At present, there are a lot fewer airports in the United States, and the profits of the companies he invested in are also very impressive. At the beginning, he also made a lot of money.The impact of karma is devastating.Judging from his personal judgment, in recent years, everyone may not be able to fly around as freely as before.Therefore, he cleared the entire aviation industry.There is also my personal judgment. Buffett really loves and hates the aviation industry. One of the largest private business jet locations in the world is Netjets, a wholly-owned subsidiary of Berkshire. I believe heStill very affectionate, he also knows that the aviation industry is really not easy.However, there was a demonstration of Netjets’ pilots demanding a salary increase at the door of Buffett’s shareholders meeting four or five years ago, which also caused Buffett to lose face.So this time the new crown epidemic has added a sum to the history of his aviation investment.Sauna Night: Berkshire sold $ 6.5 billion in stocks in April. How do you evaluate this behavior as a shareholder?Do you think he will turn the stock into cash in his hand?Chen Kaifeng: All the stocks he sold were airline stocks.So what he is doing now is swapping positions.After a short-term exchange with a very senior fund manager on Wall Street after today ‘s meeting, he also felt that Buffett was clearing some non-core positions, and then planned to use the money to make a super large-scale merger. This is also his favorite.An operation mode.Sauna Night Net: Munger was absent from this conference. Instead, he was replaced by Berkshire ‘s vice chairman of non-insurance business, Greg Abel. He was regarded as the successor of Buffett by the outside world. What is your impression of his appearance?What is his relationship with another “relative” Ajit Jean?Kaifeng Chen: As a shareholder, we have seen Abel many times before, including the long-distance race after the end of the shareholders meeting last year. Generally, Buffett issued a starting gun, but last year Buffett had Abel wearing a No. 1 jersey to shoot.Come out, he is at least one of the successors.This time he answered a lot of questions at the shareholders’ meeting. It was officially unveiled. This time I think it is very good. I talked about many capital allocation topics, mainly energy.It should be noted that last year, 46% of Berkshire ‘s capital investment was related to energy. For the company, energy is the most important area for new investment.Abel and Buffett’s style, experience, and experience are still very different.Buffett’s early secondary market (stock trading) background, slowly entered the industry.Abel seldom does stock trading in the secondary market. He has been doing industry and investing in Berkshire ‘s entire energy sector, including building wind power plants and acquiring natural gas pipelines.So the question he answered at today’s general meeting was an industrial one.But his investment philosophy is still very close to Buffett, not to pursue profiteering, but steady cash flow.With Buffett and Munger’s successors, I think it is impossible for someone like this to replace them.At present, we can see that it should be a team succession.As a vice chairman, Ajit is in charge of insurance business and the core business of Berkshire, nor is it a business that can generate cash flow that requires new capital expenditures. From the perspective of succession, he may not do any investment and asset allocationBusiness, do not do any asset allocation, manage insurance.Buffett also has two fund managers, playing the role of chief investment officer, engaged in secondary market investment, Abel is still the head of industrial investment.I think these four people are the core team.Of course, Buffett and Munger ‘s investment career is unusually long, and it is not ruled out that the last group of investors is not suitable for succession due to age issues, but Buffett ‘s core team has more than 30 people, all of whom are his company and business CEOs., Generally 30-40 years old, it is also possible for them to take over.Sauna Night Net: Under the impact of the epidemic, Berkshire Hathaway’s net reached as high as 497 in the first quarter of this year.US $ 4.6 billion, of which 545 are potential stocks.$ 1.7 billion.How does Buffett explain this not-so-good-looking transcript to shareholders?What do you think of as a shareholder?Kaifeng Chen: First of all, the business unit of Buckhill Industries was profitable in the first quarter. It was all from the secondary market stocks. The total position of the secondary market is about 250 billion US dollars. Roughly calculated, the overall secondary market may be about 20%., And the US stock market is still very close.It is also normal for the stock market to be highly volatile.The volatility of US stocks in the first quarter of this year is statistically the highest volatility since 1895. The changes in the market value of stocks held are completely understandable. At the same time, these may be required by accounting standards.Because apart from clearing cash stocks, there is nothing to buy and sell.I saw that in the second quarter, in the past April, Buffett’s stock has rebounded a lot.Moreover, Buffett often advises investors to do more business performance and try not to pay attention to changes in the secondary market of stocks. He repeatedly buys a stock, which should be regarded as a farm, instead of thinking about how much the farm can sell tomorrow, but not this farm.After buying, how many potatoes and corn can be grown, that is, how much dividends can be distributed on the stock, repurchase, cash flow, etc. This is also his explanation.I think the first quarter’s major setback was mainly due to the epidemic. Of course, the industries that interfered a lot in the epidemic, such as finance and aviation, are Buffett’s heavy industries.Therefore, his influence is particularly great, including the aviation industry and so on.I think he still feels a lot of pressure and can see that his overall investment style is very cautious.Sauna Night Net: What do you realize about Berkshire’s biggest transformation?Kaifeng Chen: To some extent, I believe that in 10 years and 20 years later, Berkshire will become more and more like an industrial company, and the investment weight in the secondary market will continue to increase. This secondary market also has a smaller and smaller weight in Buffett’s entire portfolio.At present, the secondary market has bottomed out, and the opportunities for arbitrage are less and less. He started to do some high barrier projects, vertical wind power stations, solar power stations, natural gas pipelines, railways, etc., which is what he has been doing in the past decade,He found that one of the stocks was good, he merged and acquired 100% of the shares, and delisted it directly from the secondary market. Berkshire also builds its barriers in this way. The returns of these companies are relatively stable and the risks are much lower.Sauna Night: Berkshire holds 63.8 billion Apple stocks, what is Buffett’s investment strategy for technology stocks next?Kaifeng Chen: In terms of his style, Buffett bought Apple stock and regarded it as a consumer product. He believes that Apple has a deep moat as a consumer product.In terms of the style of the two fund managers under Buffett, I think it is much more radical than Buffett. They started to buy some biopharmaceutical companies, e-commerce companies in Brazil.Therefore, Buffett has delegated more and more power to his two investment managers, and the investment weight of technology stocks will increase.Sauna Night Net: Buffett’s treatment of bank stocks, aviation stocks’ reduction and emptying, how should investors understand?Is it worth doing the same for A shares?Chen Kaifeng: Try not to touch the aviation industry as much as possible. It is not to go short, and the risk of short selling is also very high. At present, most Dublin is looking for the government to bail out. It is difficult for shareholders to obtain investment income in the aviation industry. When bailing out, the government has to take preference shares. Dividends have priority, and there is a substitute for ordinary shareholders ‘equity.Some directives, aimed at establishing routes to improve poor areas, will also affect corporate profits.The global aviation industry faces a similar situation, including A shares.The leverage of flights is high, and the operating costs are also very high. It is also greatly affected by oil prices, so it is a very high-risk industry.I think that bank stocks will continue to be held by Buffett.But bank stocks are not a very ideal investment. Now that the interest rate has dropped to zero, the bank’s profit margins have been compressed.But only in the 2008 financial crisis, the leverage ratio of bank stocks was very low, the risk was reduced by 60% -70% than before, and the banking industry as a whole was still very healthy.Sauna Night Net: Why does Buffett say this crisis is completely different from 2008?What is his comment on the Fed ‘s disposal?Why did Buffett make no big moves this time compared to the frequent shots in 2008?Kaifeng Chen: His feelings about the Fed are very complicated.For him, he praised the Fed’s rapid actions, including unlimited QE, etc., for the help of corporate liquidity.But he also mentioned that due to the rapid attack of the Federal Reserve, no one on the phone with Manger’s house made a good investment opportunity.He also repeatedly said that the future arbitrage or bargain-hunting opportunities in the secondary market will be less and less.This time is a public health crisis. The last time was a financial crisis. The trigger point was the bursting of the real estate market bubble, so the last time it could be solved with funds. As long as the capital injection is made, the bottom is paid off.This time it was a matter of public health. In Buffett’s words, he and others have no advantage. Mainly still need the government’s influence on this industry, not on individual stocks.Although he continued to be optimistic about the United States, he felt very cautious overall. He even said that he was a bit pessimistic for a while, because he mentioned that the number of repurchases in his holding company in April was 0, which is very abnormal.In the past, every time the stock plummeted, his repurchase volume would be relatively large.I feel he wants to buy, but he thinks it is not cheap enough.Or because of the Fed ‘s capital injection, some companies that plunged quickly rose back. He did n’t have the opportunity to buy. I think he was also waiting for the opportunity.Sauna Night: Is it possible that Buffett will overweight the A-share market?Chen Kaifeng: I think it actually depends on several other people. One is Munger. Munger is much more familiar with the situation in China than Buffett. BYD is also recommended by Munger to Buffett. If Berkshire wants to lay out in A shares, Munger will pay more attention to it.The other two are his fund managers, who are the “successors” of individual stock investments. They have already invested in emerging market stocks. They have some individual stock investments in Brazil and India. Maybe some exploration will be done on the A shares in the future.Sauna, Ye Wang Zhang Shuxin editor Zhang Bing proofreading Wu Xingfa
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