Buffett: Why (not) own Berkshire and why he didn’t buy during the market downturn


Why should shareholders continue to hold shares in this company in the coming years instead of diversifying their investments into the S&P 500 index? At the company’s weekend general meeting, Warren Buffett first left the answer to this question to Charlie Munger, who simply stated that he himself was fine with holding Berkshire shares because he preferred them to the entire market. What did Buffett add to that?

The well-known investor followed up on his colleague with the fact that he himself never recommended Berkshire to anyone, on the contrary, he recommends investing in an index fund that covers the entire market. He added that he did not think that most people would be able to consistently select good shares, and Berkshire has “unique shareholders” who chose Munger instead of shares and viewed the company as something that manages their savings in the long run. “I like Berkshire, but a person who knows nothing about stocks and has no special relationship with our company will do well to buy the S&P 500 index,” said the investor.

One other question was why Berkshire did not use the market’s fear during the downturn to buy stocks, especially when the government decided to help a number of companies and stimulate the economy. Buffett first pointed out that during the period of fear, Berkshire sold only a small fraction of what it owned. The investor then turned to the airlines, which received a significant portion of government assistance. According to him, this was mainly in the form of guarantees and not loans, and it was an overall good policy, although he himself would like the government to be able to help everyone in this way, including small restaurants.

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“It was perfectly fine that the government helped the entire aviation industry,” the investor continued, adding that the industry was under crisis. If aid did not come, companies would go bankrupt. And now let’s imagine Berkshire being a major shareholder in airlines. If they had “such a very rich shareholder,” according to Buffett, politicians would not have to come to the same conclusion about the aid as they actually came to. And he himself says in his words that the aid would probably not be approved.

Buffett added that in retrospect it might seem that Berkshire was supposed to shop during the downturn, but again pointed out how many companies he already owned and that he did not get rid of them at the time. And the airline’s shares also performed very well, but for the reason described above, it may have been because Berkshire got rid of their shares. Positively, Buffett spoke of international airlines because “people still want to travel.”

Source: Yahoo Finance

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