Warren Buffett just wanted to say sorry. The chief executive officer made some candid confessions at his Berkshire Hathaway Inc. annual meeting of shareholders on Saturday. Among them were regrets about sales of Apple Inc. shares, the circumstances surrounding the dumping of shares in its airline, and the failure of a healthcare company.
“It was probably a mistake,” Mr. Buffett said of his decision to sell part of the iPhone maker’s stock last year. The move was also viewed as a mistake by his business partner Charlie Munger, who conveyed his views to Mr. Buffett “in his usual low-key fashion,” Buffett joked during the virtual meeting.
Mr. Buffett, 90, is no stranger to contrition. Part of his letter to shareholders in February was devoted to explaining his “big” overpayment error for aircraft parts maker Precision Castparts. But this year’s annual meeting was fraught with recognition of missteps, even after its business posted a strong quarter with earnings hitting the second-highest level of data in 2010.
“He and Mr. Charlie have always tried to admit their mistakes and face their mistakes,” said James Armstrong, who manages assets including Berkshire stocks as chairman of Henry H. Armstrong Associates. Mr Buffett also continued to “try to gently remind us that most of Berkshire’s money is well invested,” he said.
The billionaire wondered why Berkshire did not take advantage of the temporary market downturn from the end of March last year to push more stocks up at depressed prices. Instead, the conglomerate used the first weeks of U.S. shutdowns to dump shares in its airlines as the pandemic restricted travel and, later in the year, squeezed its bank holdings.
Inventories at Delta Air Lines and Southwest Airlines, two Berkshire-owned carriers, then rose by more than 45% between the end of May and the rest of 2020.
“I don’t consider this to be a big moment in Berkshire history,” Mr Buffett said of the period, adding that the economic recovery had exceeded their expectations, thanks to the government’s stimulus measures.
Mr Buffett also said that it would have been difficult for these carriers to get the federal aid that saved them if a wealthy investor was seen as a significant shareholder in these companies. He still would not invest in airlines given the current pressure on travel, he told investors on Saturday.
And while Mr Buffett has made deals that include a bet on natural gas assets, he hasn’t made any particularly large acquisitions despite pandemic pressure on some companies. For his part, Munger explained that it would be too high a standard to think that fund managers can always perfectly time a market trough to put a lot of money to work.
There were also examples of contrition in other businesses in Berkshire. Ajit Jain, vice president who heads the company’s insurance operations, said auto insurer Geico has been slow to embrace telematics, the devices used to track drivers and reward them for better behavior.
“Geico had clearly missed the bus and was late in appreciating the value of telematics,” Jain said. “They realized that telematics plays an important role in the match between rate and risk.”
In a broader statement on the industry, Jain noted that insurers had underestimated the risks of a pandemic, demanding that they now recalibrate their models. The industry is likely to be more sophisticated in thinking about pandemic risk across its portfolios, he said.
Mr Buffett also reflected on the healthcare business Berkshire had set up with JPMorgan Chase and Amazon.com to attack the high cost “tape worm” in the system. The business was finally closed this year and Mr Buffett on Saturday acknowledged the challenges of overhauling an industry with so many stakeholders, which represents a significant portion of the country’s gross domestic product.
“We were fighting a tapeworm in the US economy and the tapeworm won,” Mr. Buffett said.
The mea culpas were also accompanied by criticism and jokes from MM. Munger and Buffett. The boom in PSPCs, or special purpose acquisition companies, is unlikely to last, Mr Buffett said, while Mr Munger aimed at cryptocurrencies and the retail explosion. The duo berated professionals for pushing people who just follow a natural human instinct to play.
“It’s really waving the red flag on the bull,” Mr. Munger said.
(Except for the title, this story was not edited by UK Time News on Social from a press release)