Below are a few interesting tidbits from the 2014 Annual Shareholders meeting for Berkshire Hathaway. The quotes are from Warren Buffett and Charlie Munger, the two leaders of Berkshire Hathaway.
Buffett: We think 1.2 times book value is a bargain for Berkshire shares–that’s why we’re willing to repurchase shares at up to that level
Buffett: Charlie and I could get within 5% of each other estimating Berkshire’s intrinsic value, but we probably wouldn’t be within 1% of each other–intrinsic value is inherently uncertain.
Buffett: I’ve heard lots of nonsensical explanations about cost of capital–no one really knows what their cost of capital is.
Buffett: We try to produce more than $1 of value for every $1 we spend–we focus on opportunity cost.
Munger: Cost of capital means different things to different people–and often means silly things to people who work in business schools. We are right, and they are wrong.
Buffett: When you need cash, it’s the only thing you need. Available cash is like oxygen– you don’t notice it 99% of the time, until it’s absent.
Munger: You can’t judge your performance compared to what could have been achieved by buying stocks at the absolute bottom. First of all, you can never tell where the bottom is except in retrospect. Second of all, you probably wouldn’t have been able to buy a significant volume of shares at those low prices.
Buffett: There is a tradeoff between risk and return. If copper prices go up, you will make the most money in the lowest-quality copper producer, because they have the highest marginal cost and the most earnings leverage. But that doesn’t mean the low-quality company offers an attractive risk/reward tradeoff before the fact.
Munger: There’s probably a bigger problem with colleges than grade schools when it comes to financial education. There’s a lot of nonsense taught in college finance courses.
Buffett: I think a college finance education often does more harm than good.