Buffett Annual Meeting: Coca-Cola abstained

As an annual investment event, this year's Berkshire Hathaway shareholders' meeting (Warren Buffett's annual meeting) attracted nearly 40,000 people. Buffett’s shareholders’ meeting is still brilliant. In Buffett's and Munger's six-hour “investment sharing feast”, investors were widely concerned about the previous concerns about the Coca-Cola equity incentive case and Berkshire's first development after breaking the “Warren Buffett Five-year Law”.

Controversial "Coca Cola abstentions": Buffett said he did not want to declare war

As the controversial question before the meeting, the first question of the shareholders' meeting was why Berkshire Hathaway would abstain from voting on the Coca-Cola equity compensation plan.

The performance of Coca-Cola Company in recent years is not encouraging. Although its first-quarter first-quarter results released this year exceeded market expectations, both its operating income and net profit declined significantly year-on-year, but Coca-Cola proposed to the management at this time. A generous equity incentive plan, and industry insiders expect to issue a full equity incentive plan, the current share price per share will be diluted.

Although some shareholders expressed dissatisfaction with the generous equity incentives, Buffett voted abstained. He said last week that he believes that the controversial compensation plan proposed by Coca-Cola is indeed excessive, but the company will vote in the shareholders. Abstention.

However, at a shareholders’ meeting on Saturday, Buffett said that even if he believes that the current Coca-Cola equity incentives are too large, he does not intend to “declare war” with Coca-Cola, and Berkshire Hathaway’s abstentions have already reached a clear information.

"I think the best results for Coca-Cola have been achieved through our abstention. We will observe what changes will happen to the company's executive compensation during the next shareholder meeting," Buffett said at the shareholders meeting.

For Berkshire's first time to break the "Warren Buffett Five-year Law," where to go in the future?

The topic of concern with Coca-Cola is Berkshire’s future development.

In 2013, Buffett's five-year rule, which Buffett has been proud of for 44 years, has never been lower than the S&P 500 index for the first time. The 2013 S&P 500's The five-year rate of return reached 128%, while Berkshire reached only 91%. The recently announced Berkshire's first-quarter financial report also showed that the company's first-quarter net profit fell 3.8%, failing to meet analyst expectations.

In response to questions, Buffett responded that Berkshire would perform worse when the market was very strong, but it would be relatively better in a bad year for the S&P 500 index.

“I warned in 2012's share letter that if the broader market performed well in 2013, we could end up with a record of outperforming the S&P 500 in every five-year period. In every economic cycle we will It's better, but we can't pack tickets, but Buffett pointed out.

Of course, Berkshire is not without weaknesses. Buffett pointed out at shareholders' meeting that companies should be able to do more positively in obtaining cash from certain subsidiaries. He said, "Another obvious weakness is that I was too slow in making decisions on personnel changes."

For this massive company, the future development of Berkshire is obviously the most concern for shareholders. Some shareholders even asked directly, what will happen to Berkshire after 20 years, "I don't know exactly the answer to this question. "Buffett said, "What I know for sure is that in the future we will have more cash than we can rationally invest in. This is not in a visible future, but the numbers will be so large that we can't make any revenue." The degree of rational deployment of cash flow."

At the shareholders meeting, he mentioned that Berkshire currently has 48 billion U.S. dollars in cash, of which 20 billion will be retained as reserve funds, and the remaining 28 billion will be used to buy companies. Of course, for mergers and acquisitions, The larger companies are still more in line with Buffett’s appetite.

Although Berkshire can be referred to as an "elephant" at the moment, Buffett still firmly denies that the shareholders' proposal to increase the company's stock price to match intrinsic value by means of stock repurchases or split-listing, "is a "We don't want to play games" and it's not a good idea to split the company. It's a huge mistake, and it was humorous when it was previously accepted by Tencent Finance. "The Berkshire is still small now." .

It is worth noting that in the future China may also be the focus of Berkshire. At the general meeting of shareholders, he pointed out that in fact Berkshire Hathaway never denied the idea of ​​"we only want to do things in the United States," and refused to conduct large-scale mergers and acquisitions outside the United States. It also revealed that at present Berkshire’s NetJets private aircraft leasing business, the world’s largest business jet company, will soon expand into China, which will provide long-term benefits.

In an interview with Tencent Financial on the 3rd, a sales manager of Netjets stated that the company’s future potential in China may exceed that of the United States or Europe.

Who is the successor? Still a secret
As the convention of the annual general meeting of shareholders, the question of who is the successor of Buffett, 84, was once again raised, but the questioning method was even more euphemistic. When Gregg Warren of Morningstar Securities stated in the questioning session, when would he be able to see Keith Hathaway’s investment managers, Todd Combs and Ted Weschler, and Buffett and Charlie Munger’s partners appeared on the stage.

Todd Coombs and Ted-Wischler were fund managers invited by Buffett to the company to help manage Berkshire Hathaway's investment. They were also considered to be the chief investment officer's post when Buffett retired. Succession choices.

However, for this issue that has been followed for many years, Buffett still did not get the answer at the shareholders meeting.

However, Buffett’s son, Howard Buffett, was once again involved in the turmoil about his successor due to “Coca Cola abstentions.” Shareholders pointed out that since Howard will eventually replace his father, he will serve as a non-executive chairman at Berkshire. Did not vote against the highly controversial executive compensation package of Coca-Cola, then how can shareholders be assured that he will become a good steward of his father’s company?

Of course, this issue has not been answered by Buffett positively. It focuses more on describing the importance of maintaining the comity of the board of directors. It does not question unwise decisions. It thinks that it is very important to understand the social nature of the board of directors. The process of selecting directors is very important. Usually it is not to find "ferocious hounds". "They are looking for something more like pet dogs."

In contrast to previous years, this year's successor of Buffett’s “little partner” Charlie Munger was also concerned by shareholders. Buffett said with a joke, “Charlie is 90 years old, and he responds to the crisis of the middle-aged crisis. I was deeply encouraged by this, but it also stated that this issue has not been discussed with the board of directors at present, but the analysis pointed out that this seems to imply that if Munger passes away, Berkshire may not have a new vice chairman.

And Munger himself answered more briefly, "Most old people in their 90s will soon disappear."

As a six-year-old partner than Buffett, Munger is likened to "the canary in the coal mine." Coal miners usually carry canaries when they work underground. In the event of a toxic gas leak, the canaries will be poisoned first and serve as a warning.

Buffett's investment: safety is still the most important benchmark for value investment, Buffett has a large number of followers, and Buffett's investment remains an important topic of the shareholders' meeting.

At the shareholders’ meeting, Buffett reaffirmed the essence of safe investment. His wife said that after she died, she needed 10% of her money to invest in bonds and 90% of her investment index. This time, the position was questioned by shareholders and they did not trust themselves. The heirs, and Buffett replied, "My wife is already rich and she doesn't need to earn higher returns, so that the money will be safe to gain."

The ability circle is also an important concept of Buffett's investment. It warns people to invest in their own competence circle, that is, their own ability and knowledge can understand the field, but for how to know their own competence circle, Buffett replied, “I know my ability circle very well. Borders, but for others, there is no way to give advice, and everyone needs to be aware of their own abilities and knowledge."

Rethinking is also an important quintessence of Buffett's investment strategy. Buffett at the shareholders’ general meeting rethought his investment during the financial crisis and stated that he had spent too much time on Berkshire Hathaway’s idle cash during the financial crisis.

In the first few months of the financial crisis, Buffett actively intervened and reached a number of one-time transactions with many large U.S. companies including Goldman Sachs and General Electric. In addition, Berkshire Hathaway also made some smaller investments in companies such as Harley-Davidson and Tiffany.

However, Buffett said in reviewing these decisions, "If we keep our full firepower to the bottom of the situation, we have achieved far less good results." He stressed that "the timing should be able to get a very significant improvement. ”

And buddy Munger pointed out, "You can't compare your performance with 'What would be the case if you buy stocks at the bottom of the absolute'. First of all, unless the matter is later analyzed, you can never know where the bottom is. Second, when the price is low, you may not be able to buy that large number of shares."

In addition, Warren Buffett also admitted that his investment in Energy Future Holdings (Energy Future Holdings), Buffett said, in this case, we think that energy prices will remain high, but it turns out that I made a major investment mistakes. Buffett also refused to shirk responsibility for this wrong decision to the rest of the company.

Buffett described this as a catastrophic investment in his latest letter to shareholders, and the company may go bankrupt in the near future.