First-Timer Notes From Capitalist Coachella

I finally made it to Value Investing Woodstock... aka Nerdchella... aka the Berkshire Hathaway (BRK-B) annual meeting in Omaha... I have been meaning to experience this meeting for at least 20 years, but something always got in the way. Late April/early May is a busy time of year – when I was younger, it was […] Not rendering correctly? View this e-mail as a web page [here](. [Empire Financial Daily] First-Timer Notes From Capitalist Coachella By Berna Barshay --------------------------------------------------------------- [When to buy tech again]( Is it time to buy the historic dip in tech darlings like Meta Platforms, Shopify, or Apple? Empire Financial Junior Partners will learn exactly when to pull the trigger on some of these deals. [Click here to see how to join](. --------------------------------------------------------------- I finally made it to Value Investing Woodstock... aka Nerdchella... aka the Berkshire Hathaway (BRK-B) annual meeting in Omaha... I have been meaning to experience this meeting for at least 20 years, but something always got in the way. Late April/early May is a busy time of year – when I was younger, it was a big wedding weekend... and at this stage of life, the conflicts come more from end-of-year school recitals and spring season charity benefits. But back in early 2020, I resolved to finally go since Berkshire's chairman and CEO, legendary investor Warren Buffett, was in the last year of his 80s... The time for procrastination was running out and his advancing age created a sense of urgency. I had the good fortune to meet Buffett once before – back in 2008 – when a friend and I attended an event where he spoke. At the time, my friend was bottle feeding a rescue kitten and had to feed the delicate animal every two hours... so she made the bold move of sneaking it into the event so she could feed it on schedule. The kitten – and being the only two women in a sea of men – turned out to be the perfect motivator to get Buffett to part the crowds that surrounded him when the formal portion of the event ended. He ushered us – and the kitten – to his side and my friend and I got five minutes of Buffett's undivided attention... and the kitten, named Darwin since he was the only one from his abandoned litter that survived, got a portfolio of photos that led to him getting adopted by a well-heeled shelter visitor with a private jet. I suppose being an acquaintance of Buffett's made the feline a bit of a good luck charm. Despite my good fortune of getting that personal encounter with one of the greatest investors of all time, I didn't want to miss out on attending the Berkshire meeting at some point... My colleague Whitney Tilson has famously not missed the meeting for 25 years running now, and I have other friends who have been attending since they were in their 20s. Of course, that 2020 meeting wasn't meant to be, as it was canceled like everything else that year... and the 2021 meeting didn't happen in person either. With Buffett now 91 and Berkshire vice chairman Charlie Munger now 98 – the sense of urgency ratcheted up another notch and I finally made it! Let's start with the obvious fact that as they themselves pointed out from the stage, these guys have 190 years under their belts between them... And they took questions for seven straight hours with a one-hour break. That would be exhausting at any age... The fact they can do it in their 90s is kind of mind-blowing. While some of the answers were a bit long and circuitous – the rambling was more like a riff or a stream of consciousness – it didn't indicate any loss of acuity. If anything, the rambling answers felt like indulgence well earned... These guys were having fun with it! Buffett is of course famous for his love of Dairy Queen, which Berkshire owns, and McDonald's (MCD), and I was told to watch for Munger's intermittent snacking on peanut brittle from See's Candies, another company fully owned by Berkshire. Pretty much everything I read these days talks about cutting out sugar as the key to longevity – well this pair provide quite the piece of contra-evidence for that! Source: Twitter/@firstadopter One other thing they provide good evidence for: the power of not retiring. At some point, everything about us takes on a "use it or lose it" nature as we age – from the muscles to the brain. I've worked with a few people over the years who worked 20 years or more past traditional retirement age out of love for the investing game, long after they had made more money than they would ever spend. They clearly didn't know what they would do if they stopped working – and maybe on some level, they feared that if they stopped, their minds would deteriorate. Formal work clearly isn't the only way to keep the mind active – but it's certainly working for some people I know who choose to keep going long after they could stop. And it's certainly working for Buffett and Munger as well. --------------------------------------------------------------- Recommended Link: [Elon Musk's secret fuel?]( In addition to leading the charge for batteries, electric vehicles, and solar-powered homes, the Tesla founder is quietly working on a new type of fuel to power his SpaceX rockets. McKinsey, a leading consultancy, claims this technology will change our lives forever and create a $4 trillion industry. And one little-known company at the forefront of this industry has the potential to become "America's Next Big Monopoly." If you missed out investing in Tesla, Apple, Amazon, Google, or Netflix early on... this could be your second chance. [Get the details here](. --------------------------------------------------------------- The pair was predictably cryptic when asked about their latest moves in the portfolio... Berkshire loaded up on shares of oil giant Chevron (CVX) in the first quarter – it's now a top-four position. Berkshire also made substantial purchases in Occidental Petroleum (OXY). This is a bold allocation of capital to the energy sector, and these and other purchases led the first quarter to be one of Berkshire's biggest ever in terms of net purchases of stock. In fact, the first quarter was the biggest stock-buying quarter for the company since 2008. In 2008, stocks had taken a huge tumble... and while it was a scary time to invest, tons of bargains were available. And while the market was weak in the first quarter of 2022, it certainly wasn't weak for Chevron or Occidental (or any other energy stock) as oil and gas ripped higher following Russia's invasion of Ukraine. When asked why they were piling into energy stocks now, the pair remained quite coy and self-deprecatingly joked that they don't know much about energy. It's the latest entry in a long history of these two not wanting to "talk their book." Buffett and Munger are notoriously and persistently mute about current positions... but that doesn't mean that they aren't willing to express an opinion. Munger was particularly vocal about his disdain for financial advisors pushing for speculation in the market. His distaste for unscrupulous market agents was only outdone by his aversion to bitcoin and cryptocurrencies in general. This isn't a surprise, but it was refreshing to see someone steadfastly hold to their crypto skepticism these days. Even with the recent pullback in bitcoin, the past two years have been stellar for crypto and have gone a long way toward turning even the biggest former bears into agnostics when it comes to crypto. But not Munger, who enthusiastically continues to play the role of the King of the Crypto Curmudgeons – something he does endearingly well. When later asked how to invest in a way that protects you against the return of inflation, Munger took another stab at bitcoin when he paraphrased the Nancy Reagan catchphrase from the '80s: "Just say no to bitcoin." One of the more surreal moments came when a questioner asked how prepared the Berkshire insurance businesses are in the event of a nuclear strike... It's hard to believe that the question even came up... but that's the world we live in these days. And if you are going to ask it of any investors, why not the only two men still actively investing large pools of capital who would actually remember the day that the atomic bombs dropped on Hiroshima and Nagasaki? I appreciated the candor when they answered that they had no hedge for this because there is no hedge for this. Munger – in his typically colorful style – nailed it with a comment that if the nuke is coming, he "will crawl under the table and kiss my a** goodbye." Buffett in response reminded us that the insurance regulator would be dead like everyone else. Dark humor, indeed. In an age where executives sometimes feel like they have to have an answer for everything – I appreciate the honesty. Of course, the elephant in the room is what happens to Berkshire when these two are gone... It should be no surprise that someone did ask the tough question. Buffett expressed his confidence in Greg Abel, who currently runs the non-insurance operations for Berkshire, and is the heir apparent to the CEO role when Buffett ultimately steps down. Buffett attributed 99.9% of Berkshire's success to its culture and stated that the managers throughout the company are indoctrinated in its culture. I think he is underselling himself – one of the greatest investors of all time – quite a bit when he attributes Berkshire's success to culture. But I also do think there is a succession plan in place, and Berkshire will thrive long after Buffett and Munger pass it on to the next generation of leadership. As for BRK-B shares, I will defer to Whitney, who has been tracking the company closely for decades now... He believes Berkshire "offers a unique combination of safety, growth, and undervaluation." It has been a part of our Empire Stock Investor newsletter's large-cap portfolio from the beginning, and it probably will be there forever, given its status as Whitney's pick for "America's No. 1 Retirement Stock." While the shares aren't as cheap as they once were in recent years – trading at an 11% discount to net asset value versus historical discounts of 20% or more – they provide a good ballast for any portfolio. This year they have done exactly what you would have hoped they would do – outperform the S&P 500 Index during rocky times... So far this year, BRK-B shares have outperformed the S&P 500 by almost 20 percentage points. You can learn more about Berkshire's current valuation in the [May 2 Whitney Tilson's Daily](. It's important to know there is so much more to the Berkshire meeting than just listening to Buffett and Munger, although that's the obvious highlight... Value shoppers can enjoy an array of bargains in the exhibition hall – everything from discounted car insurance from Geico to diamond necklaces from retailer Borsheims (both are wholly owned by Berkshire). My purchases included half a carry-on's worth of See's Candies treats for my daughter and this pair of Buffett and Munger rubber ducks from Oriental Trading, another Berkshire company... Beyond the official events at the convention center and beyond (such as shopping events and a 5K on Sunday morning), there are tons of schools, investment firms, and investors hosting various happy hours and dinners. We hosted two Empire events – a cocktail party on Friday night which literally hundreds of readers, subscribers, and investors stopped by – and a Saturday night dinner for our lifetime subscribers. It was such a treat to finally meet readers and subscribers after two years at this job... and I hope there will be more opportunities to make real-world connections such as these in the future! More broadly, I know everyone felt grateful to be back in person in Omaha. About 40,000 people attended the meeting – and the crowd was way more diverse than I would have anticipated. There were a lot more young people than I would have guessed, and it feels like I met people from almost every state. And there were no shortage of Europeans and Asians who crossed the globe to be there. I also met several people who had the good fortune to retire early thanks to investing in Berkshire. It was a friendly atmosphere befitting the reputation of its midwestern setting... And I must say I found the people I met in Omaha, while riding Ubers, visiting a mall, at the convention center, and in the hotels super friendly. Fellow attendees were friendly too, bound together by their love of value investing and their reverence for these two elderly statesmen of the practice. Capitalist Coachella jokes aside, the Berkshire meeting is a great reminder of how common interests can bring us together in a country and world often so bitterly divided. A large group of people tied together by common interests – in a way, the Berkshire meeting is indeed analogous to a music festival or a comic-con... And everybody seemed grateful to be back in person! In the mailbag, more reader letters in reaction to last week's essay on streamer Netflix (NFLX)... If you made it to the Berkshire meeting this year or watched the livestream, what were your standout takeaways? Does the inevitable changing of the guard in the C-suite give you pause about owning Berkshire shares... or do you trust that Buffett has the transition well planned? I really enjoyed having personal interactions with so many readers and subscribers last weekend. Is the chance to interact personally with me, Whitney, Enrique, and Herb something you would be interested in? If yes, would you prefer a virtual environment you can attend from anywhere, like a Zoom meeting, or would you be interested in attending an in-person event in select cities? Let me know via e-mail by [clicking here](mailto:feedback@empirefinancialresearch.com?subject=Feedback%20for%20Berna). On that note, a reminder that I will be at the Money Show next week in Las Vegas on Monday through Wednesday – so come find me if you will be there! My readers can [register here]( and get a 20% discount. "I really enjoy your emails and followed your advice on Berkshire being at least 5% of my holdings, which served me well on the last market drop. Thank you for that. "With respect to Netflix, do you think the programming has anything to do with the stock drop? I hate to say it, but it took a big hit with the release of Cuties, and now again with cartoons full of sex, adult content in children's programming, and somewhat heavy-handed political content. "Whether anyone agrees with their decisions or not, I can't help but notice that they and Disney (DIS) both took a nosedive following such moves, while other streaming services, such as Amazon (AMZN) and niche services like Sony's (SONY) Crunchyroll, and Eros (ESGC) – with Bollywood content, continue to go up. If the issue was price and/or broadband or the business model, I don't see how it explains such a disparity with similar services. "I ask this as others have suggested this is the problem, especially with parents becoming more hyperaware of the content of children's shows. And while it may seem a bit ridiculous, can we afford to ignore this possible factor? Thanks, and hope I haven't offended." – Anastasia M. Berna comment: Anastasia, thanks for the question... and no, you haven't offended. Netflix did see a brief but dramatic pickup in churn after Cuties was released, but that normalized quite quickly. The jump in churn is similar right now – but I think it correlates with the recent price increases more than an individual piece of content. There hasn't been a controversy as high profile as the one over Cuties. The 43% drop since earnings is definitely a reaction to the growth slowdown. Disney has its own problems – and has dropped 14% over the same time frame – but I would attribute that to the loss of the Reedy Creek special jurisdiction status at Disney World. The streaming part of Amazon is too small relative to the rest of the company to drive the stock. The same could be said for the studio at Sony, which has a huge electronics division, the video games business, the music business, financial services, and an imaging business – among other things. The growth slowdown at Netflix is calling growth prospects for the whole sector into question. Eros – which you mentioned – is down almost as much as Netflix since the earnings report, with a 39% drop. Warner Bros. Discovery (WBD) and Paramount (PARA) have also had a rough go – down 21% and 17%, respectively. These content controversies aren't desirable – but I don't think they are material reasons for these stocks being down. "Hi, I check frequently with relatives and friends on what streaming services they subscribe to and which are the ones being under consideration to be cancelled. "Netflix is quite a few times in the latter category. The bottom line is that all agree that there are too many choices and at $5 to $15 per month. Netflix being at the top of that range – they get chopped first. Binge watching is another great feature however it does not help to retain customers. "Netflix will be fine for years to come. Streaming is here to stay, subject to product development." – Huub Regards, Berna Barshay May 4, 2022 If someone forwarded you this e-mail and you would like to be added to my e-mail list to receive e-mails like this every weekday, simply [sign up here](. © 2022 Empire Financial Research. All rights reserved. Any reproduction, copying, or redistribution, in whole or in part, is prohibited without written permission from Empire Financial Research, 601 Lexington Ave., 20th Floor, New York, NY 10022 [www.empirefinancialresearch.com.]( You received this e-mail because you are subscribed to Empire Financial Daily. [Unsubscribe from all future e-mails](