Official Releases

• 2011 Annual Meeting Announcement
• 2011 Annual Meeting Visitor’s Guide
• Q1 2011 Earnings Preview Press Release
• Questions and Answers from 2011 Annual Shareholders Meeting regarding trading in Lubrizol Corporation shares by David L. Sokol
• Audit Committee Report

Live Feeds

• Liz Claman, Fox Business anchor
• Andrew Ross Sorkin, New York Times
• Becky Quick, CNBC
• Alex Rubalcava
• Joe Magyer, Motley Fool
• Jacob Wolinsky, ValueWalk blog
• BorsheimsBRK
• Alex Crippen, CNBC.com Warren Buffett Watch blog
• Clint Carlos
• NYTimes DealBook
• Michael de la Merced, reporter at The New York Times and DealBook

Live Blogging

• Omaha.com’s Warren Watch
• DealBook: Live-Blogging the Berkshire Annual Meeting

Berkshire Hathaway 2011 Annual Meeting Notes

• 2011 Berkshire Hathaway Meeting Notes by Dustin Hunter
• Comprehensive 2011 Berkshire Meeting Notes by Ben Claremon of The Inoculated Investor
• Berkshire Hathaway 2011 Shareholder Meeting Notes (Part 1 and Part 2) by Gurufocus

Notable Quotes

Warren Buffett: Regarding David Sokol issue:  ”What happened is inexplicable and inexcusable. I will never understand what transpired.”

Warren Buffett: “The inexplicable part I’ll tell you what goes through my mind when I think about it. He made no attempt to disguise the fact that he was buying the stock.”

Charlie Munger: “You can always tell a man to go to hell tomorrow.”

While this web authority metric is not perfect, it is fun to see how fellow value investors rank. It appears that I rank twelfth with @FatPitch and Value Investing News comes in at number 27. The average for the Value Investor PeerIndex Group is 29. I think you will find this list to be a good resource for finding new value investors to follow and you might even learn a bit about your own social media habits.

Value investors on Twitter ranked by PeerIndex

What do you think of this list? Is there anyone missing from it? Let me know in the comments section below.

Official Releases

• 2010 Annual Meeting Announcement
• 2010 Annual Meeting Visitor’s Guide
• Q1 2010 Earnings Preview Press Release

Live Feeds

• Liz Claman, Fox Business anchor
  “We are LIVE from Omaha @ 1pET on Fox Biz w/ CEOs of Burlington Northern, Dairy Queen, Shaw, Acme brick, Clayton Homes, & all 3 Buffett kids”
• Andrew Ross Sorkin, New York Times
  “i’m sorting through q’s for buffett/munger. lots of good ones re: gs, derivatives, railroads, etc. send q’s to arsorkin@nytimes.com #BRK2010″
• Becky Quick, CNBC co-anchor of Squawk Box
  “Munger: in terms of BRK doing deals and buying more companies after BNSF, “I don’t think it’s over.” #BRK2010″
• Mike Alfred, CEO of BrightScope
  “BYD had accomplished things that seemed almost impossible to do” (before we invested in them) -Munger #brk2010″

Live Blogging

• Omaha.com’s Warren Watch
• Motley Fool Inside Value at the 2010 Berkshire Hathaway annual meeting
• Live Blog Of Berkshire Hathaway Shareholders Meeting – MarketBeat WSJ.com

Blog Posts

• Charlie Munger: Lehman Was the Worst, But ‘Impressed’ By Goldman’s Blankfein – CNBC’s Warren Buffet Watch

Videos

• Berkshire Wingman : Flying through an economic storm, with David Sokol, MidAmerican chairman – MSNBC
• Are Shareholders Happy with Buffett’s Investments? – Fox Business
• Brokering the Oracle of Omaha’s Portfolio – Fox Business

Photos

• Borsheims Jewelry Flickr photos
• Berkshire Hathaway tagged Flickr photos

Articles

• One on One with Burlington Northern CEO Matthew Rose – PBS Nightly Business Report

Notable Quotes

Charlie Munger: “I think what we need is a new version of Glass-Steagall.”

Warren Buffett: “I think the prospect for significant inflation have increased. Not only here, but around the world.”

Warren Buffett: “There will always be opportunities if you’re not working with large amounts of money.”

However, the first thing I thought of was would this potentially present a fat pitch special situation opportunity. Warren Buffett always keeps his word on merger deals. Could the Burlington Northern offer create another Constellation Energy Group (CEG) opportunity?

As you might recall, last year I made some significant profits from the Constellation Energy Group merger arbitrage. Berkshire Hathaway’s MidAmerican Energy Holdings offered $26.50 per share in cash for Constellation Energy. After the deal was announced, the price of CEG shares drift down to as low as $15 and then up to $30 last year. Mr. Market sure got moody, even with Mr. Buffett at the helm of that deal. Could the same thing happen again with BNI?

I decided to ask my Twitter followers. Here’s my question and their responses:

FatPitch: I’m hoping $BNI will dip down to $90 in the coming weeks. Do you think it will happen? Lower?

rationalwalk: @FatPitch Can’t see BNI slipping to $90…. would require crash in BRK shares well below $80K to do that.  Very, very unlikely.

marketfolly: @FatPitch could happen if market dives as many predict. at same time, few merger/arb plays out there right now; funds swarm to same plays

ModernGraham: @FatPitch If it does, it would be Mr. Market at his finest – there’s no reason for it to be anything but $100 now

MrMarketBlog: @FatPitch I doubt it. I don’t think anyone is going to doubt Warren getting this deal done

vlad0: don’t underestimate irrationality

What are your thoughts on the potential for arbitrage profits with the Burlington Northern Santa Fe deal? Share them in the comments section below or follow me on Twitter.

The main topic of the interview concerned the failure of Lehman Brothers. According to Mr. Buffett, the government indicated they didn’t have the authority to bail out Lehman. British authorities said that such a large transaction would have required a shareholder vote. Warren Buffett stated that he felt that Lehman should have been transferred in a more orderly fashion. A lot more value was lost due to the chaotic nature of the way things ended with Lehman Brothers. If Merrill Lynch wasn’t sold, Buffett speculates that it too would have failed at the same time and potentially even caused more chaos in the markets.

Apparently, Mr. Buffett was contacted before Lehman Brothers declared bankruptcy about a deal. The head of Barclay’s called Mr. Buffett the weekend before with a transaction to help them acquire Lehman. The transaction was just too complicated for him to understand. Mr. Buffett asked for more details, but never received a fax he requested with more details regarding the transaction. If Mr. Buffett didn’t understand it, who knows how convoluted it must have been.

AIG also wanted help from Warren Buffett. He turned down their first offer for their property and casualty business. Then AIG came back shortly with a reinsurance transaction, but that ultimately blew up even though Buffett was interested in that deal.

When asked what worse things didn’t happen in the crisis, Warren Buffett thinks that it would have been much worse if the Fed didn’t act to guarantee commercial paper. Merrill could also have gone the same day as Lehman Brothers. If that happened, who knows what might have happened in the markets. The real heroes of the financial crisis according to Mr. Buffett were Bernanke and Paulson. We made it through this “economic Pearl Harbor” with their help.

Mr. Buffett thinks we are a lot better off than we were one year ago. When asked about the chances of a second downfall, Mr. Buffett thought the odds were against that unless there is a terrible exogenous event. “We are on the mend,” he quipped. Mr. Buffett also indicated that residential real estate has gotten much better. I was a bit surprised at Mr. Buffett’s assessment of the current economic situation. I’m a bit more skeptical of this recovery, but I’m starting to rethink that now.

When asked about what indicator of economic activity he would watch, if he could only choose one, Mr. Buffett stated that freight carloadings and truck tonage moved would be the ones he would track. I’ve been keeping an eye on air freight, but now I’m considering adding those two metrics to my tracking radar. After a quick search, I found the Weekly Railfax Rail Carloading Report.

The topic of Kraft’s (KFT) offer for Cadbury (CDY) came up. Interestingly, Warren Buffett stated that he thinks Kraft’s stock is undervalued. Mr. Buffett believes that this undervalued stock price is what is disadvantaging Kraft in its attempt to acquire Cadbury. Mr. Buffett thinks Kraft’s offer for Cadbury is “full price,” and the CEO will need to do a lot of things right to justify this price. If Kraft doesn’t end up acquiring Cadbury, buying shares of Kraft (KFT) below $26 a share might be a no-brainer.

Disclosure: I own shares of Kraft (KFT) at the time this article was posted.

Official Releases

• Annual Meeting Information
• 2008 Berkshire Hathaway Annual Report

Premeeting Preparation

Source: Mark Wancier

• Background Reading
• 2009 Berkshire Hathaway Annual Meeting Weekend Facebook Event page
• Value Investing News Calendar – May 2009

Meeting Schedule

• Borsheims cocktail receiption for shareholders on May 1, 2009 from 6:00 PM to 10:00 PM.
• Door open at the Qwest Center on May 2, 2009 at 7:00 AM.
• The Berkshire movie will be shown at 8:30 AM to 9:30 AM.
• The question-and-answer session will start 9:30 AM and run until 3:00 PM.
• The annual meeting will start at 3:15 PM.
• Receiption for shareholders from outside of North America at 4:00 PM.
• Main Borsheims gala on May 3, 2009 from 9:00 AM to 4:00 PM.
• Gorat’s will be reserved for shareholders from 1:00 PM to 10:00 PM on May 3, 2009 (Requires reservation, call 402-551-3733 on April 1st).

Meeting Questions

There are several changes to how this year’s meeting questions will be handled. First, several journalists have been selected to participate in the question-and-answer period with questions that shareholders have submitted by email. These journalists include the following: Fortune’s Carol Loomis, CNBC’s Becky Quick, and New York Time’s Andrew Ross Sorkin. Just click on the previous links to send your questions to those journalists.  In your email, let the journalist know if you would like your name mentioned if your question is selected.

Second, there is no need to rush the doors this year when they open at 7:00 AM in order to get in line for the mics. There will be a drawing at 8:15 at each microphone for those shareholders hoping to ask questions themselves. Questions will alternate between those asked by the journalists and those from the winning shareholders.  Hopefully, this will improve the quality of questions this year and result in more questions directly related to Berkshire Hathaway.

If you are looking for question ideas, Marcelo P. Lima is organizing questions for this year’s Berkshire Hathaway meeting at his website. His goal is to create a list of great, unanswered questions.

Jeff Matthews is also asking his readers to provide him with great questions regarding Berkshire Hathaway. Readers who submit the Top Ten vote-getters as of the New York Stock Exchange close on April 15, 2009, will receive an autographed copy of Pilgrimage to Warren Buffett’s Omaha. Updated: Here are the Top 10 Questions for Warren Buffett.

Live Blogging from Annual Meeting in Omaha

Twitter Streams:

Source: Mark Wancier

• Liz Claman, Fox Business anchor
  “up now, it’s 4am CT, not as freezing as last year. Buffett has a staged cowboy shootout at Qwest to kick off day”
• Alex Crippen, CNBC.com
  “Buffett: Not every CEO wants a “rational” compensation system because irrational systems often pay better”
• Joe Ponzio - FWallStreet
  “Buffett: Wells Fargo under $9 again, I’d put my entire net worth in it.”
• Andrewr Sorkin – DealBook
  “Buffett says “I was dead wrong” about Gen Re when he bought it. Commends management for fixing it.”
• Jason McGowan
  “Warren suugests reading the book “the Great Crash”
• Matthew Dettinger
  “You can bet on inflation & I guarentee the dollar will buy less in 5 yrs -Buffett”
• David Spitz
  “sue decker and billg are sitting within whisper distance”
• David Burn
  “Over time people will live better and better in this country. Our system works.” – Warren Buffet”
• 3dcheckers
  “At goreshims cocktail party. Trying to find the bar.”
• #Berkshire - Follow all the #Berkshire tweets!

Live Blogging

• Live from the Berkshire Shareholders meeting – Omaha.com
• Warren Buffett Watch – CNBC.com

Videos

• Charlie Munger on CNBC regarding the economy – CNBC

Articles

• Berkshire’s Munger Favors ‘100% Ban’ on Credit Swaps – Bloomberg
• Buffett dispenses gloom at Berkshire fest - Reuters

Blog Posts

• Top 5 Quotes From Berkshire Hathaway Annual Meeting - The Manual of Ideas

Berkshire Hathaway 2009 Annual Meeting Notes

• From the AGM – The Motley Fool Berkshire Hathaway Board
• NEW meeting notes - The Motley Fool Berkshire Hathaway Board
• Berkshire Hathaway 2009 Meeting Notes – ValueHuntr
• NEW 2009′s Woodstock for Capitalists: Recap – buffettologist.com

Please let me know of any other resources to add to this list. I suggest you bookmark this page and check back often. I will be updating this page as new information becomes available.

New Berkshire Hathaway Stocks

The only new position to appear this quarter is Eaton Corporation (ETN). Eaton is a diversified industrial manufacturer focused on power management systems. Berkshire Hathaway added just 2,908,700 share of Eaton, which is much small than the typical Buffett purchase. Therefore, it might represent the holding of a subsidiary, such as a Lou Simpson pick for GEICO.

Increased Positions

• ConocoPhillips (COP): 83,955,800 shares (40.7% increase)
• NRG Energy, Inc. (NRG): 5,000,000 shares (54.4% increase)
• US Bancorp (USB): 72,937,126 shares (6.3% increase)

The significant news here is Warren Buffett’s big move into oil with ConocoPhillips. It looks like Mr. Buffett might have been a bit early on this oil play, since the price of oil has dropped significantly since the end of September. However, it should be noted that Mr. Buffett has repeatedly stated that he is not a market timer. 

I must admit that I’ve been also watching the price of oil. I made myself a note a few months ago to review oil stocks if the price of crude dropped below $55 a barrel. We are right at that price level now, so I will be looking at some of my favorite energy stocks again.

Reduced Holdings

• Bank of America (BAC): 5,000,000 shares (reduced by 45%) 
• Carmax Inc. (KMX): 18,444,100 shares (reduced by 13.4%)
• Home Depot Inc. (HD): 3,700,000 shares (reduced by 11.5%)
• Lowes Companies Inc. (LOW): 6,500,000 shares (reduced by 7.1%)
• United Health Group (UNH): 6,379,900 shares (slightly reduced)
• Wellpoint Inc. (WLP): 4,777,300 shares (slightly reduced)
• Wells Fargo & Co. (WFC): 290,407,668 shares (reduced by 247,200 shares)

The biggest surprise in the positions that appear to be reduced is Wells Fargo (WFC). While the actual reduction in the the position size is relatively small, I was under the impression that Mr. Buffett was adding to his Wells Fargo position. He even stated on CNBC that he was adding shares of Wells Fargo to his personal account.

Unchanged Holdings

• American Express (AXP): 151,610,700 shares
• Anheuser Busch Cos. Inc. (BUD): 13,845,000 shares
• Burlington Northern Santa Fe (BNI): 63,785,418 shares
• Coca Cola (KO): 200,000,000 shares
• Comcast Corp (CMCSA): 12,000,000 shares
• Comdisco Holding Co. (CDCO): 1,538,377 shares
• Costco Wholesale Corp. (COST): 5,254,000 shares
• Gannett Inc. (GCI): 3,447,600 shares
• General Electric Co. (GE): 7,777,900 shares
• GlaxoSmithKline (GSK): 1,510,500 shares
• Ingersoll-Rand Co. Ltd. (IR): 636,600 shares
• Iron Mountain Inc. (IRM): 3,372,200 shares
• Johnson & Johnson (JNJ): 61,754,448 shares
• Kraft Foods Inc. (KFT): 138,272,500 shares
• M & T Bank Corporation (MTB): 6,715,060 shares
• Moody’s (MCO): 48,000,000 shares
• Nike Inc. (NKE): 7,641,000 shares
• Norfolk Southern Corp. (NSC): 1,933,000 shares
• Procter & Gamble Co. (PG): 105,847,000 shares
• Sanofi Aventis: 3,903,933 shares
• Sun Trusts Banks (STI): 3,204,600 shares
• Torchmark Corp. (TMK): 2,823,879 shares
• USG Corporation (USG): 17,072,192 shares
• Union Pacific Corp. (UNP): 8,906,000 shares
• United Parcel Service Inc. (UPS): 1,429,200 shares
• Wabco Holdings Inc. (WBC): 2,700,000 shares
• Wal-Mart Stores (WMT): 19,944,300 shares
• Washington Post Co. (WPO): 1,727,765 shares
• Wesco Finl Corp. (WSC): 5,703,087 shares

Finally, it is interesting to note some of the positions that have remained unchanged. Even though there has been a lot of talk about Burlington Northern Santa Fe (BNI), that position remained unchanged at the end of September. I was also disappointed to see that Mr. Buffett is no longer adding shares of USG, even though the stock price is much lower now that it was when he first bought it. I guess USG’s troubles in the face of the credit/housing market collapse no longer makes that stock appear attractive enough for Mr. Buffett to view it as a cheap value.

Share your own observations on Berkshire Hathaway’s latest stock holdings in the comments section below. I’m interested in hearing your thoughts.

Disclosure: I own shares of US Bancorp (USB), Wells Fargo & Co. (WFC), Kraft Foods Inc. (KFT), and USG Corporation (USG).

According to the release, you can trek to Omaha, Nebraska to see Warren Buffett and Charlie Munger speak on May 2, 2009 at the Quest Center. I added the date of the 2009 Berkshire Hathaway Annual Meeting event to the Value Investing News Calendar. I’ll update the entry with details of the events proceeding and following the annual meeting as I receive more information.

I’ve also added Value Investing Congress West, the Value Investor Conferences, and the Wesco Financial Annual Meeting to the calendar. Please contact me if you know of other event dates to add to the Value Investing News Calendar.

I’m not sure yet which of these events I’ll be able to attend. Hopefully, I’ll make it to at least one of them. If you are planning to attend any of these meetings, let us know which ones.

We can kick off this year’s meeting with the press release and the Q1 quarterly report for Berkshire Hathaway.

I also got word of a Berkshire Hathaway Annual Meeting after party at Nomad Lounge.

Official Releases

• Berkshire Hathaway First Quarter Earnings 2008
• Berkshire Hathaway First Quarter Press Release
• Wesco Financial Corp. First Quarter Earnings 2008 Press Release   

Premeeting Coverage

• Prepping for Warren Buffett: The Art of the Elevator Pitch (Videos)
• Live from Omaha: Berkshire Borsheims Party
• Cousin packages memories
• Few Rooms Left As Berkshire Weekend Begins – KETV Omaha
• Borsheim’s Braces For Berkshire – KETV Omaha
• Welcome to Omaha! A Berkshire Hathaway weekend preview – The Curious Capitalist
• Borsheims Shareholders Meeting website

Blog Posts

• Berkshire Shareholder for Klamath dam removal
• In Omaha at the Warren and Charlie Show – MoneyMasters with Vahan Janjigian
• 2008 Berkshire Hathaway Annual Shareholders Meeting – Updates from Omaha, Nebraska – Part I – Undervalued Securities.com
• 2008 Berkshire Hathaway Annual Shareholders Meeting – Updates from Omaha, Nebraska – Part II – Undervalued Securities.com
• Inside the meeting – Bill Mann at The Motely Fool
• Great quotes so far – Bill Mann at The Motely Fool
• More quotes – Bill Mann at The Motely Fool
• Last set – Bill Mann at The Motely Fool
• New! 2008 Berkshire Hathaway Shareholder Meeting: Detailed Notes – Reflections on Value Investing
• New! Scenes from an Annual Meeting – Jeff Matthews Is Not Making This Up
• New! 2008 Berkshire Hathaway weekend – ShoeMoney

Media Coverage

• See’s offers a sweet treat for Berkshire meet - Omaha World-Herald
• 1995 bio still the Wikipedia on Warren – Omaha World-Herald
• Warren Buffett eager to spread his life’s lessons to growing audience – Omaha World-Herald
• Buffett joins select company – Omaha World-Herald
• Warren Buffett to draw biggest crowd ever – Reuters
• Massive Crowds in Omaha for Big Berkshire Hathaway Weekend – Action 3 News
• Tribes, commercial fishermen plan to attend Berkshire Hathaway meeting to demand removal of PacifiCorp dams on Klamath – AP
• Portrait of Buffett will be painted early Saturday – AP
• Live Blog Archive: Warren Buffett’s Q&A With Shareholders - CNBC
• Live Blog: Warren Buffett’s Q&A With Shareholders (Part 2) – CNBC
• Berkshire Live: Updates from the annual meeting – Omaha World-Herald
• Woodstock for Capitalists 2008 Blog – Morningstar
• Capitalist Carnival-We’re LIVE IN OMAHA – FOX Business
• The Buffett Madness Has Begun! – FOX Business
• Stampede in Omaha!!! – FOX Business
• BRK Meeting Notes: What Buffett Is Saying – FOX Business
• More Buffett and Munger Nuggets – FOX Business
• FOX Biz Continues Live Blogging from the BRK Shareholder Meeting! – FOX Business
• Berkshire’s Moody’s Stake No Conflict, Buffett Says – Bloomberg
• Current crisis worse than Enron: Berkshire’s Munger – MarketWatch
• Berkshire’s muni insurer starts strongly: Buffett – MarketWatch
• Some banks are too big – MarketWatch
• Buffett cautions on long-term returns – MarketWatch
• Buffett sees euro, sterling strong against dollar – Reuters
• Buffett, gifts make it worth the trip from California – Omaha World-Herald
• Buffett faced a few challenges over past year – Omaha World-Herald
• Berkshire Hathaway: 31,000 show up at Qwest Center for annual meeting – Omaha World-Herald
• Notes and highlights from meeting – Omaha World-Herald
• Warren Buffett Speaks to Shareholders at Qwest – Action 3 News
• Buffett says Fed avoided chaos in Bear bailout – The Economic Times
• Buffett Says Credit Crisis Ebbs for Wall Street Firms – Bloomberg
• Buffett and Munger think holding the Olympics in China will be good – KPTM FOX 42
• Berkshire’s leaders offer tips on unhealthy living – KPTM FOX 42
• Buffett’s Bond Success – WSJ MarketBeat
• Buffett to investors: Think small – CNNMoney
• Berkshire Hathaway Holds $4 Billion of Auction-Rate Securities – Bloomberg
• Berkshire eyes German family-owned businesses – MarketWatch
• Crowds flock to Omaha sage – Times Online
• Buffett again rebuffs protesters who want Klamath dams out – NTV
• Live from Omaha: The Warren Buffett Show – Portfolio.com
• Buffett Says U.S. Dollar to Remain Weak Versus Other Currencies – Bloomberg
• Liveblogging the Berkshire Hathaway annual meeting – The Curious Capitalist
• Berkshire to own 100% of Cologne Re – MarketWatch
• Buffett explains his purchase of Berkshire - Omaha World-Herald
• Buffett faced a few challenges over past year – Omaha World-Herald
• The 5 a.m. Buffett Breakfast Club – WSJ MarketBeat
• The Warren Buffett Show – WSJ MarketBeat
• Munger for President – WSJ MarketBeat
• Lucci for Chairman? – WSJ MarketBeat
• The Berkshire Method: Just Buy It – WSJ MarketBeat
• Buffett’s Straight-Talk Express – WSJ MarketBeat
• Buffett’s Dollar Talk – WSJ MarketBeat
• Buffett on Beijing Olympics – WSJ MarketBeat
• Buffett doesn’t see CDS market collapsing – Reuters
• Buffett eyes family-owned German businesses – Reuters
• Buffett says bought $4 bln of auction-rate debt – Reuters
• Buffett sees euro, sterling strong against dollar – Reuters
• Seven Hours With Warren – Forbes
• Earnings? What Earnings? – Portfolio.com

Photos

• Klamath River Protest 
• Klamath River Protest 2
• Klamath River Protest 3
• Yurok tribal council member Richard Myers speaks
• Klamath Riverkeeper Regina Chichizola
• Borsheims Jewelry’s photostream
• Borsheims (Friday night party) – Buffett dollar
• Borsheims (Friday night party) –  girl plays
• Borsheims (Friday night party) –  shareholders smile
• Borsheims (Friday night party) – book
• Borsheims (Friday night party) – woman leaving
• Borsheims (Friday night party) – reading jewelry catalogue
• Kick-off celebration
• Outside the Borsheims jewellery store
• Inside Borsheims
• Shopping at Borsheims
• Shareholders playing cards

Videos

• Video of Borsheims jewelry – Omaha World-Herald
• Warren Buffett Talks to CNBC’s Becky Quick at Shareholders Meeting – CNBC
• Buffett on the Fed – Bloomberg
• The business of boxed chocolate – Time, The Curious Capitalist
• Buffett Business – ABC News

Please share links to your coverage of today’s events in the comments section below.

PS: Can someone pick me up a deck of the Berkshire ballsball like cards for charity that I heard about? I’ll pay for the cost and shipping.

The companies that he and Charlie Munger look for are:

1. Understandable
2. Businesses with favorable long-term economics
3. Run by trustworthy management
4. Selling at sensible prices

Mr. Buffett once again reiterates that “a truly great business must have an enduring ‘moat’ that protects excellent returns on invested capital.” Fat Pitch Financials has been all about finding companies with wide moats ever since I first set up this blog in 2004. Given my economics background, I find Buffett’s arguement for the need for wide moats compelling. He argues that companies that lack a barrier to competition will succumb to the competitive forces of a capitalist market that tend to drive profits to zero. In this year’s letter, Buffett provides the example of GEICO’s and Costco’s low-cost production and Coca-Cola’s (KO) and Gillette’s world-wide brand as formidable barriers that are essential for maintaining enduring competitive advantages. Other durable competitive advantages include legal protections, high switching costs, the network effect and toll bridges. I discussed these barriers to entry in my review of Ten Ways to Build Moats to Hold Back Competition. The key is that these moats need to be “enduring” in order to avoid the creative destruction of capitalism. Companies in industries prone to rapid and continuous change are to be avoided, since it is unlikely their moats will be enduring.

In the past, Mr. Buffett often talked about return on equity, but many had assumed he actually meant returns on invested capital. This assumption was right since in this letter Mr. Buffett explicitly mentions returns on invested capital (ROIC). I think this is the first letter Warren Buffett has been so explicit about the importance on returns on invested capital. He actually also notes the importance of looking at a business’s returns on incremental capital invested when he discusses See’s Candy. Shai Dardasti examined Warren Buffett’s discussion regarding See’s Candy in a recent blog post that I highly recommend.

While Buffett says it is important to have trustworthy management, he also notes that if you restrict your investments to companies with durable competitive advantages that this “eliminates the business[es] whose success depends on having a great manager.” Invest in companies that can be run by an idiot because often one eventually will. Buffett reminds us in his letter that a great business should not require a superstar to produce great results. Buffett uses the example of a successfully growing medical practice led by a premier surgeon, but unlikely to be as successful if this leading surgeon leaves. However, the well know Mayo Clinic is likely to endure regardless of who is running it. This reminder makes me a bit nervous about my investment in Western Sizzlin (WEST), because I think Sardar Biglari is likely critical for that company to produce great returns. Of course, for many years it could be said that Warren Buffett was required to produce great results at Berkshire Hathaway (BRK-A).

Finally, Buffett also notes how advantagous it can be to have a business with low capital investment requirements. I can personally attest to that advantage. My online business has virtually no capital requirements, but has the ability continually increase its earnings.

Great businesses have sustainable competitive advantages, low capital investment requirements, don’t require superstar managers, and are in stable industries. Do you have any companies that fit these criteria? Share them below to see if they can hold up to Buffett’s criteria for great businesses.

Some have speculated that Warren Buffett’s massive donations this past year is what secured Berkshire Hathaway’s position as the most respected company in the world. That might be what did it. I’m just surprised that Berkshire Hathaway (BRKa) was not at the top of the list last year.

Perfectly timed, I just received a copy from John Wiley & Sons of the completely revised and updated Warren Buffett Speaks by Janet Lowe. I’ve actually never read this book, so I’m pretty excited to have a copy of it. I have a few other books to read, including the Active Value Investing by fellow blogger, Vitaliy Katsenelson. Once I clear out my reading backlog, I’ll let you know what I think of Warren Buffett Speaks.

Getting back to the list of the world’s most respected companies, I think it might be worth looking over this list. Quite a few of the top companies on the list have sustainable competitive advantages. Here are the top ten companies to get you started:

1. Berkshire Hathaway (BRKa)
2. Johnson & Johnson (JNJ)
3. Toyota Motor (TM)
4. Procter & Gamble (PG)
5. General Electric (GE)
6. Microsoft (MSFT)
7. Nestlé (NSRGY)
8. Apple (AAPL)
9. Cisco (CSCO)
10. ExxonMobil (XOM)

You can review the complete list of The World’s Most Respected Companies by loading the PDF at the previous link. I noticed several of the Fat Pitch Financials Port holdings on the list, including: Microsoft (MSFT), Merck (MRK), Pfizer (PFE), and Unilever (UL). I actually a bit surprised how large a percentage of my holdings made this list.

I might have to look a bit closer at this list to see if any these top quality stocks might be on sale. Do you see any other fat pitch opportunities on this list of the 100 most respected companies?

Full Disclosure: I own many of the stocks mentioned in this article.

I couldn’t attend this year’s meeting, so I’m going to be collecting as many stories and reports as I can find on the internet regarding this year’s shareholders’ meeting. If you find something not on this list or would like to share your own first hand account of the meeting, please send them to me so I can share it with others like I did for the 2006 Berkshire Hathaway shareholders’ meeting. I will be updating this post continuously all weekend and probably for the next couple of weeks as detailed meeting notes become available.

Official Releases

• Berkshire Hathaway First Quarter Earnings 2007
• Berkshire Hathaway First Quarter Press Release
• Wesco Financial Corp. First Quarter Earnings 2007 Press Release

Blog Posts

• Berkshire Days are coming – Businessworks Inc.
• Live From Omaha: The Berkshire Hathaway Meeting – The Motley Fool
• Analyst Blog – Live from Berkshire Hathaway Shareholders Meeting – Morningstar
• Berkshire Hathaway 2007: Charlie Munger on Ethanol – ValueSeeker.Net
• Blogging Buffettland – The Bwog
• Newcomers to Berkshire Hathaway annual meeting: Protesters? – BloggingStocks
• Meeting Highlights. You need to buy this stock – Yahoo! BRK-A Board
• Berkshire Hathaway Shareholder Meeting: From the Floor – ThePanelist
• Warren Buffett on Shorting Berkshire Hathaway (BRK.A, BRK.B) – ThePanelist
• Hiring the Next Generation at Berkshire Hathaway – ThePanelist
• Berkshire Hathaway on Global Warming – The Panelist
• Warren Buffett Answers Question on Silver Trade – ThePanelist
• Berkshire Hathaway Charlie Munger on Ethanol – ThePanelist
• Warren Buffet on the Decline in The U.S. Dollar – ThePanelist
• Berkshire Board Allows PetroChina Divestment Activists to Speak – ThePanelist
• Live from The Berkshire Hathaway Annual Meeting – ThePanelist
• Berkshire Hathaway Annual Meeting Report – Fool.com Post of the Day
• Berkshire Hathaway Annual Meeting 2007 – Toro’s Running of the Bulls Market Blog
• Off to the Berkshire Hathaway shareholders meeting in Omaha – Once More Unto the Breach
• Day One: Palm Pressing – Once More Unto the Breach
• Day Two: Bloodshot eyes and adrenaline – Once More Unto the Breach
• Day Three: I can sleep when I die – Once More Unto the Breach
• Pilgrimage to Omaha, Part I: This is Big – Jeff Matthews Is Not Making This Up
• Pilgrimage Part II: The Newspaper Generation – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part III: When the Math Doesn’t Work – Jeff Matthews Is Not Making This Up
• Pilgrimage Part IV: What if Bob Nardelli Had Done This Once in a While? – Jeff Matthews Is Not Making This Up
• Pilgrimage Part V: Budding Buffetts and The Best of All Worlds – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part VI: The Most Versatile Investor in the World – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part VII: “You Don’t Want to Let Him Down” – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part VIII: Who Do You Trust? – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part IX: Avoiding Catastrophe; Some Bad Advice; and One Unanswerable Question – Jeff Matthews Is Not Making This Up
• Pilgrimage, Part X: On The Cheap – Jeff Matthews Is Not Making This Up
• The 2007 Berkshire Hathaway Annual Meeting Top 20 Questions - J. V. Bruni and Company

Media Coverage

• Off To Omaha – Forbes
• Buffett’s bash begins Saturday in Omaha
• Wallman, Money Manager, Says Warren Buffett Is Not Retiring - Bloomberg video
• Buffett gala draws critics as well as admirers – Reuters
• Berkshire Notes – Omaha World-Herald
• Berkshire Live: Updates from Q&A session – Omaha World-Herald
• Buffett – FT.com
• Subprime crisis not big threat: Buffett – MarketWatch
• Subprime defaults made worse by securitization: Buffett – MartketWatch
• Buffett defends dual-class share structure in newspaper biz – MarketWatch
• Berkshire’s insurance earnings to decline, Buffett says – MarketWatch
• Global warming may increase hurricane losses, Buffett says – MarketWatch
• Berkshire shareholders vote against Darfur resolution – MarketWatch
• Buffett sees no ‘orchestrated’ credit contraction – MarketWatch
• Buffett plans more overseas exposure for Berkshire – MarketWatch
• Buffett says may hire 4 chief investment officers – Reuters
• Buffett in Spotlight At Berkshire Meeting – Washington Post
• Buffett Says Berkshire Is Ready to Buy ‘Big Business’ – Bloomberg
• Berkshire shareholders reject PetroChina resolution – International Herald Tribune
• Berkshire Hathaway faithful set another record – Omaha World-Herald
• Berkshire to keep PetroChina stake – Omaha World-Herald
• Buffett calls Dow Jones “ultimate trophy property” – FT Trading Desk
• Owning the railroads was Buffett’s childhood dream – FT Trading Desk
• Buffett almost done succession plan – FT Trading Desk
• Warren Buffett’s tax advisor? President George W. Bush – FT Trading Desk
• Buffett on the subprime mortgage meltdown – FT Trading Desk
• Buffettpalooza rocks Omaha – FT Trading Desk
• Live from Omaha: The Sudan Issue – Portfolio.com
• Wastin’ Away in Berkshire Hathaway-ville – Portfolio.com
• Buffett defends dual-class share structure in newspaper biz – MarketWatch
• Omaha-Cum-Lourdes – Forbes
• Oscar’s unlikely, but Berkshire’s movies are a perennial hit – Omaha World-Herald
• Hoop Dreams II: Buffett over LeBron – Omaha World-Herald
• The Berkshire Hathaway Theme Park – Portfolio.com
• A Tour of Berkshire, Omaha – Portfolio.com
• Gateway to the Best – Portfolio.com
• Berkshire Weekend Draws Attention – WOWT News
• Warren Buffett Performed at Justin Brands Booth – Business Wire
• 2007 Berkshire Hathaway Shareholder Meeting – About.com: Investing for Beginners
• Whitney Tilson’s full notes from the 2007 Berkshire shareholder meeting (pdf) – Value Investor Insight

Photos

• Neubie’s Berkshire Hathaway 2007 photos
• Berkshire-sponsored reception on Friday – Yahoo! News AP
• Crowds outside of Borsheims on Friday – Yahoo! News AP
• Shareholders at the reception – Yahoo! News AP
• Sitting around the tables at the reception – Yahoo! News AP
• Massachusetts Coalition to Save Darfur in Omaha - Yahoo! News AP
• Shareholders asking Berkshire Hathaway to sell holdings in PetroChina – Yahoo! News AP
• Indian tribes protesting dams along the Klamath river – Yahoo! News AP
• Omaha World-Herald Berkshire Hathaway Meeting Photos
• Warren Buffett is flanked by his son, Peter, and daughter, Susie – Yahoo! News AP
• Buffett plays with a western band at the Justin Brands stage – Yahoo! News AP
• Buffett playing his eukalalee – Yahoo! News AP
• Buffett singing – Yahoo! News AP
• Warren Buffett strikes a pose on a mattress – Yahoo! News AP
• Warren Buffett thanks performers at the Fruit of the Loom booth – Yahoo! News AP
• Warren Buffett speaks to reporters – Yahoo! News AP
• Buffett and his children wait for movie – Yahoo! News AP
• John Gartmann’s photos
• Curtis Joe Walker Omaha 2007
• Jason Smith’s 2007 Berkshire Hathaway Annual Meeting photos
• Wawrus 2007 Berkshire Meeting
• BuffettJr’s Berkshire Hathaway Annual Meeting 2007 photos

Acknowledgements: Many of these links were originally discovered by BRKNEWS. 

Stay tuned here for more…

In his letter, Shai asks just one question:

At the Q&A I arranged you told me that today (May 23, 2005) you were “85%
Graham and 15% Fisher.”

If you were today 20-something years old, again looking to allocate less than $10 million, and free to allocate capital into well over 8,000 opportunities (before even considering anything overseas), would your Latticework of Mental Models primarily be searching for:

 a) Situations reminiscent of 1957 – akin to Daehan Flour Mills, or
 b) Situations reminiscent of 1987 – akin to Moody’s Corporation?

In response to Shai’s 1,091 word letter that accompanied the question above, he got a to the point, eight word hand written response from Warren Buffett.  Mr. Buffett writes:

“Either is fine.”
“[a] Better for small sums.”
“[b] Better for large sums.”

My guess was that Warren Buffett would recommend primarily searching for situations similar in quality to Moody’s Corp (MCO). However, Buffett pretty clearly indicates that for investing small sums, situations reminiscent of 1957 – akin to the Daehan Flour Mills opportunity in South Korea in 2002 are better. Those situations reminiscent of 1957 follow the Graham approach to value investing that focuses on very low PE and/or net assets per share greater than the current trading price.  You can view Warren Buffett’s actual response, which is attached to this letter from Shai Dardashti.

I must say, this response from Warren Buffett has me rethinking some of my investment strategies.  Is finding a company with a durable competitive advantage selling at a price with a margin of safety not quite as important as I thought?  Should I be also looking for deep value opportunities in net-nets and low PE stocks?  I’ll be thinking about these questions for quite some time.

James Altucher made some great points in his article for why Warren Buffett has added to his position in US Bancorp and why it might still be a good buy now.  US Bancorp has been outperforming other banks with a 23 percent return on equity.  The average for the banking industry as a whole is only 10 percent. Even more impressive is the fact that US Bancorp’s return on equity has been increasing even while the yield curve has inverted. Many banks struggle to be profitable when short term interest rates climb above long term interest rates because it makes it difficult for them to profit from the spread between the money they lend out and the interest they pay depositors.

James’s thinks Wall Street is throwing the baby out with the bath water with US Bancorp. The collapse of stock prices in the subprime mortgage sector has also dragged down stock prices for almost all banks. There is widespread concern about credit quality.  However as James points out, the credit quality of US Bancorp’s loans has actually gone up over the past quarter.

Warren Buffett is an expert in investing in regional banks. Given that USB is almost 5% off its recent lows and its price is close to what Warren Buffett recently purchased it for, James argues that the stock is a strong buy here. The argument is very compelling, so I decided to try my hand at valuing this company.

Since I’m not familiar with valuing bank stocks, I decided to visit the website of an expert on stock valuation, Aswath Damodaran.  On his site, I found a dividend discount model spreadsheet designed specifically to value financial service called eqexret.xls. The spreadsheet uses the payout ratio for the high growth period and the expected growth rate in earnings per share to estimate the expected dividends in the high growth period.  The expected growth rate in earnings is calculated by simply taking the retention ratio and multiplying it by the return on equity.  I understand the basics of how this model works, but I’m not familiar enough to know its weaknesses.

I used the following inputs in the dividend discount model:

• Net Income = $4,703.00
• Book Value of Common Equity = $20,197.00 in 2006 and $20,086.00 in 2005
• Current Earnings per share = $2.64
• Current Dividends per share = $1.39
• Number of shares outstanding = 1,778
• Beta of the stock = 1.00
  (It was actually 0.75 on Yahoo but I prefer to use a risk neutral beta.)
• Riskfree rate= 4.65%
• Risk Premium= 5.00%
• Length of high growth period = 10 years
  (Because I feel this is a wide moat business.)
• Growth rate in stable growth period = 5.0% based on nominal GDP growth

After making these inputs the spreadsheet output the following:

• Return on Equity = 23.41%
• Retention Ratio = 47.35%
• Expected growth rate = 11.09%
• Cost of equity = 9.65%

Since earnings have been stable at US Bancorp, I did not normalize earnings.  I also maintained all the same inputs for the stable growth period, except for the growth rate.  The bottom line is that I found each share of USB to worth $62.69. Shares of USB are currently trading for $34.90, so the margin of safety is 44%.

I definitely encourage you to review my inputs and assumptions. You can review my whole USB dividend discount model spreadsheet online using Google Spreadsheets. I’m sure many of you have a different take on these inputs and some of you might even challenge the model I used. Do you know of a better way to value banks? Share your thoughts below. I look forward to the discussion.

Full Disclosure: I do not currently own shares in any of the stocks discussed in this article.

Berkshire Hathaway Performance
First, per-share book value increased by an amazing 18.4% in 2006 for Berkshire Hathaway. Over the past 42 years, book value has grown at a rate of 21.4% compounded annually.  2006 was a great year for Berkshire Hathaway primarily because no major weather related events impacted the insurance business.  Mr. Buffett also had great things to say about Tony Nicely’s performance at managing GEICO.

Outstanding Managers
Warren Buffett admires the following managers of giant companies:

• Ken Chenault of American Express
• Jeff Immelt of G.E.
• Dick Kovacevich of Wells Fargo

Acquisitions
Berkshire Hathaway completed the acquisition of PacificCorp, Business Wire, Applied Underwritters, ISCAR, Justin Industries, and TTI. “Tuck-in” acquisitions included Russell Corp. and the intimate apparel business of VF Corp. at the Fruit of the Loom subsidiary. 

Insurance
“In 2006, …everything went right in insurance – really right,” wrote Mr. Buffett.

I found it interesting that Warren Buffett mentions climate change and how it impacts Berkshire’s ability to see what lies ahead. Mr. Buffett writes, “We do know that it would be a huge mistake to bet that evolving atmospheric changes are benign in their implications for insurers.”

Mr. Buffett also reminds us, “Be fearful when others are greedy, and be greedy when others are fearful.”  I’m starting to become greedy this past week.

Warren Buffett provides a short history of Lloyd’s and how it created Equitas as result of the fallout from asbestos and other environmental and product claims that emerged in the 1980s.  Apparently, Mr. Buffett and Ajit have reviewed the pre-1993 liabilities associated with Equitas and has decided that it will survive the claims, so he offered a huge reinsurance policy to Equitas in 2006.  Mr. Buffett thinks the odds are in his favor if he receives $7.12 billion in cash and securities for paying all future claims up to $13.9 billion.  According to Scott Moser, the CEO of Equitas, “Names wanted to sleep easy at night, and we think we’ve just bought them the world’s best mattress.” It appears they were willing to pay a premium price for this top tier mattress.

Newpapers
“Now, however, almost all newspaper owners realize that they are constantly losing ground in the battle for eyeballs. Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed.” Mr. Buffett then writes, “…the days of lush profits from our newspapers are over.” This is a clear sign to me that Mr. Buffett is going to stay clear of any “bargains” in the newspaper sector unless maybe a stock is trading for less than net asset value.

Real Estate
HomeService, the second largest real estate brokerage firm in the U.S., reported an overall volume decrease of 9% and profits fell by 50%.  “Nevertheless, we will be seeking to purchase additional brokerage operations,” wrote Mr. Buffett. I was also interested in real estate brokerage companies this past year.  I was hoping to still own one now, but my stake in Realogy (H) was sold when the company announced it was being bought out by private equity this year.

“Clayton Homes remains an anomaly in the manufactured-housing industry, which last year recorded its lowest unit sales since 1962.”  Ouch! Clayton’s financing business kept the company profitable, but that was primarily due to Berkshire’s financial strength.

Stock Investments
“We don’t itemize the two securities referred to, which have a market value of $1.9 billion, because we continue to buy them.  I could, of course, tell you their names. But then I would have to kill you,” warns Mr. Buffett. Yikes! Now I really want to know what Warren Buffett is up to in the stock market.  Anyone have any guesses?

Foreign Currency
Berkshire Hathaway is closing their direct foreign exchange position.  “When we first began making foreign exchange purchases, interest-rate differentials between the U.S. and most foreign countries favored a direct currency position. But that spread turned negative in 2005. We therefore looked for other ways to gain foreign-currency exposure, such as the ownership of foreign equities or of U.S. stocks with major earnings abroad.” Is this a clue to what those two securities he is still buying?

Regarding his foreign currency derivatives, Warren Buffett states, “…just like stocks and bonds, [derivatives] are sometimes wildly mispriced.” However, he makes a point that the derivates are managed by him personally and are free of counterparty credit risk.

Succession
Warren Buffett announced, “I intend to hire a younger man or woman with the potential to manage a very large portfolio, who we hope will succeed me as Berkshire’s chief investment officer when the need for someone to do that arises.” This sounds like a great opportunity for someone and it will be interesting to see who they pick for this important job.

Directors
Warren Buffett’s four criteria for selecting board members are as follows:

• Owner-oriented
• Business savvy
• Interested
• Truly independent

Berkshire Hathaway selected Susan Decker, CFO of Yahoo! to join the board this year.

Executive Compensation
Warren Buffett complains about the current state of executive compensation. Compensation consultants are driving CEO compensation inflation by creating reports showing all the perks and high salaries other companies are offering. Then “all the kids want one,” according to Buffett. I agree with Mr. Buffet that what we really need are very independent directors to stop this.

Hedge Fund Rates
2-and-20 compensation will lead to poorer investors that use these expensive managers. “When someone with experience proposes a deal to someone with money, too often the fellow with money ends up with the experience, and the fellow with the experience ends up with the money,” quips Buffett.

Walter Schloss
The key to Schloss’ success according to Edwin Schloss: ”We try to buy stocks cheap.” Warren Buffett thinks it might have even been a benefit that Walter Schloss never went to college and learned about the efficient market theory (EMT).

EMT
“After all, if you are in the shipping business, it’s helpful to have all your potential competitors be taught that the earth is flat,” comments Buffett about the current state of college financial training.

Books
The following three books were mentioned at the end of the letter:

• Poor Charlie’s Almanack
• Seeking Wisdom: From Darwin to Munger
• Where are the Customers’ Yachts?

These books will apparently be on sale at this years annual meeting on May 5, 2007.

Lo and behold, it looks like Mr. Buffett has accumulated more shares of USG Corporation (USG). Over the past quarter, Berkshire Hathaway’s holdings of USG Corp. increased from 16,700,992 shares on September 30, 2006 to 17,072,192 shares on December 31, 2006.

As you might remember, I added USG Corp. to the Fat Pitch Financials Port last August.  It’s nice to see that Warren Buffett continues to find this stock worthy of buying. I’m already up almost 17% since my purchase of USG. As I’ve witnessed before, it is often very profitable to invest along side Warren Buffett.

So what else has Buffett done with the Berkshire Hathaway’s stock holdings this past quarter?  Buffett upped his stake in Wells Fargo (WFC). He also added a significant $843 million position in US Bancorp (USB). It appears that Mr. Buffett is finding opportunities in banks.  With everyone concerned about the potential bursting of a housing bubble and the inverting of the yield curve, it is interesting to see that Warren Buffett maintains his long-term perspective and finds value in today’s banking and financial sector.

Buffett also started a new position in UnitedHealth Group (UHG). My guess is that he took advantage of the depressed stock price of this health insurance company during its stock options scandal last year, which resulted in the ousting of its founder and former CEO Dr. William McGuire. Buffett invested a more modest $47.6 million in UnitedHealth.  I’ve had some negative personal experiences with this company that will probably keep me from being interested in this stock however.

Warren Buffett bought an even smaller position in Ingersoll-Rand (IR).  He started a new holding of just under $25 million in this stock. Ingersoll-Rand is a manufacturer of various industrial goods including various refrigeration equipment, construction equipment (think Bobcat), security products, and other products. This stock price may also be affected by concerns about a decrease in housing construction.  However, the company has been buying back stock and apparently Warren Buffett has also been buying. The company has had strong returns on invested capital over the past five years according to my quick look at Ingersoll-Rand’s financials.  This opportunity looks worth investigating a bit further.

It is also revealing what Mr. Buffett sold this past quarter.  He completely sold his stakes in Target (TGT), Sealed Air Corp. (SEE), and the parent company of Outback Steakhouse, OSI Restaurant Partners (OSI).  Berkshire Hathaway also trimmed back its holdings in Ameriprise Financial (AMP), Comcast (CMCSK), Pier 1 Imports (PIR), and H&R Block (HRB).

I believe the sale of Target and continued holding of Wal-Mart Stores (WMT) indicates that Mr. Buffett does not believe Target has a durable competitive advantage over Wal-Mart. Target seemed to be gaining a lot of ground on Wal-Mart last year, but lately it also appears that Wal-Mart is finally starting to try to address its issues.

The continued liquidating of Berkshire Hathaway’s H&R Block position is probably associated with the continuing deterioration of H&R Block’s competitive position. H&R Block seems hell bent on tarnishing their remaining brand image by pushing their Rapid Refund and other financial services that often leave their customers worse off than many other alternatives. Trust is an important element when selecting a tax professional, and H&R Block’s tactics do not promote trust in its brand. This bottom feeding behavior will likely be unsustainable and continue to allow other competitors to gain ground in the tax preparation sector.

I’m a little surprised to see the reductions in Buffett’s Comcast and Ameriprise Financial holdings. These reductions may primarily be due to the significant appreciation of both of these stocks over the past year.  Maybe the prices of these stocks are starting to look richly valued in Mr. Buffett’s eyes.

There are always lessons to be learned by watching the stock trades of this great investor. I look forward to hearing more details about Warren Buffett’s latest moves when he publishes his letter to shareholders in the spring.

[Sham Gad] called me up late Wednesday night (i.e. a week ago) to let me know that he’d be meeting with Buffett on Saturday morning per the Q&A meeting — and also had invited Warren Buffett over to a reception to be hosted by the University of Georgia on Friday night, got word that Mr. Buffett would try his best to attend (!), and told me I’d be welcomed to be a guest of UGA.  

Buffett only allows college students from the schools he invites to participate in the Q&A he holds at Berkshire offices — so I knew in advance I wouldn’t be able to attend any “official Berkshire” parts of the… trip.  With that said, there mere opportunity to shake Mr. Buffett’s hand at the event hosted by UGA on Friday evening was well worth the 1,000 mile commute. 

I flew out to Omaha on 48 hours notice to deliver a letter I wrote to Warren Buffett.  I figured I’d have no more than 10 seconds of Mr. Buffett’s personal attention, and wanted to make the most of every moment in his company. 

Mr. Buffett and I indeed shook hands, he put the sealed letter in his coat jacket, and I eagerly await his response.  Mr. Buffett had been offering students the chance to take a picture holding onto his wallet.  It was Shabbat so I jokingly suggested to instead whisper a “stock tip” — no that it’s any more appropriate, in hindsight.   (The “tip” was just to follow the GEICO approach to large scale acquisitions — and over time buy Iscar in small chunks – eventually owning the whole thing.)

During the discussion, Warren Buffett also shared an amazing value stock discovery he made in 1950. I just linked to Shai’s write up of Buffett’s 1950 value discovery over at Value Investing News. Shai also shared a copy of his amazing letter to Warren Buffett.  In his letter, Shai asks just one question:

At the Q&A I arranged you told me that today (May 23, 2005) you were “85%
Graham and 15% Fisher.”

If you were today 20-something years old, again looking to allocate less than $10 million, and free to allocate capital into well over 8,000 opportunities (before even considering anything overseas), would your Latticework of Mental Models primarily be searching for:

 a) Situations reminiscent of 1957 – akin to Daehan Flour Mills, or
 b) Situations reminiscent of 1987 – akin to Moody’s Corporation?

Wow, what a great question! The lead up to that question was just as interesting and highly informative. I encourage you to read the whole letter.

I hope Shai receives a response from Mr. Buffett. My guess is that Warren Buffett will recommend primarily searching for situations similar in quality to Moody’s Corp (MCO). What do you think Mr. Buffett’s response will be?