Hello, my name is Liping Ouyang, and I am an Equity Analyst here at The Bahnsen Group. Since 2018, I’ve attended the Berkshire Hathaway Annual Meeting every year. Investors from around the world gather in Omaha to sit and listen to the “Buffett sermon.”
Each year, the weekend brings something special – professionals connect, ideas are exchanged, and wisdom is passed down. Mr. Buffett has set the gold standard in our industry through his extraordinary track record and unwavering commitment to fiduciary duty.
This year marks the 60th anniversary of the Berkshire meeting, and with Mr. Buffett stepping down as CEO at the end of the year, it feels like the end of an era. Yet, his legacy lives on. More “Buffetts” are following in his footsteps – working full-time, compounding wealth the right way, and upholding the values he championed.
It’s a privilege to share my takeaways with you –
MACRO, POLICY, CASH LEVEL, GLOBAL INVESTMENT & CURRENCY
Trade: Import Certificates rather than Tariffs
Buffett believes that using tariffs as a weapon is both unwise and unfair. He argues that in a world of 8 billion people, it’s a mistake for a small portion (like the U.S.) to boast about its success while alienating others. Instead, he advocates for mutual benefit through trade, where each country focuses on what it does best.
In a world of 8 billion people, the U.S. cannot isolate itself—and with its good fortune and strong system, it has a responsibility to set a positive example for the rest of the world.
To address persistent trade deficits, Buffett supports a system of Import Certificates (ICs):
- How it works: Exporters receive ICs when they sell goods abroad. Importers must buy these ICs to bring goods into the U.S.
- Effect: This creates a market-based mechanism that: Incentivizes exports (exporters earn extra revenue from selling ICs) & Discourages imports (importers face higher costs)
- Analogy: Similar to a “cap-and-trade” system for pollution, this approach aims to balance trade flows without outright protectionism.
Read more: https://en.wikipedia.org/wiki/Import_certificates
Deficits, Policy, and the Fragility of Trust
Buffett warns that unchecked government deficits, like today’s 7% gap between U.S. revenue and spending, are unsustainable. He sees echoes of past civilizations that fell apart when their fiscal imbalances spiraled out of control. While he admits he wouldn’t want the job of fixing it, he stresses that stabilizing the currency is essential to maintaining trust in government and economic fairness. When inflation or policy manipulation favors the savvy and penalizes the trusting, social cohesion suffers, and the foundation of society weakens.
Record Cash Position (~$350B): Power of Patience
Berkshire Hathaway’s cash position reached a record $347.7 billion as of March 31, 2025. Berkshire is prepared for extraordinarily attractive opportunities which don’t come often—but they do come. Buffett emphasized that not being fully invested has often paid off. Holding cash allows Berkshire to act decisively when rare, high-quality opportunities arise. Berkshire Hathaway recently came close to deploying $10 billion, underscoring that they are always evaluating large opportunities—but don’t feel pressured to be fully invested at all times. “One problem with the investment business is that things don’t come along in an orderly fashion, and they never will.”, Buffett said.
Japan Investment: Long-Term Holdings
Buffett invested in five major Japanese trading companies (known as sogo shosha) because they were trading at very low valuations, which he found attractive.
Berkshire Hathaway approached the companies to relax a 10% ownership cap, signaling a desire to potentially increase its stake while maintaining transparency and respect for corporate governance.
Buffett emphasized that he has no intention of selling these holdings, even over the next 50 to 100 years, viewing them as permanent investments.
Buffett noted the advantage of borrowing in yen at low interest rates, making the income from these investments particularly attractive.
Currency Risk: A Long-Term Concern
Buffett warns that governments tend to debase their currencies over time, often due to unsustainable fiscal policies. He’s particularly concerned about the U.S. trajectory, where short-term thinking may erode long-term value. While Berkshire rarely speculates on currencies, it has done so in the past—most notably in the early 2000s when Buffett made over $2 billion on foreign currency contracts. Although such bets are unlikely today, he acknowledges that deteriorating U.S. policy could eventually justify renewed foreign currency exposure.
Buffett adds that emerging markets—like Mongolia—can be attractive if they remain business-friendly and maintain currency discipline, but hyperinflationary environments are avoided due to their unpredictability.
SECTOR LEVEL: ENERGY, UTILITY, FINANCIALS, HEALTHCARE & REAL ESTATE
Energy Infrastructure Requires Federal Leadership
Cooperation between government and private industry is essential to meet the massive capital demands of future energy infrastructure. Progress has been limited, and current models don’t adequately address the risks involved in deploying such capital. The federal government must take a leading role, much like during wartime mobilization or the creation of the interstate highway system, where centralized authority enabled swift action. However, the U.S. system’s fragmentation across states complicates unified efforts, especially in peacetime. This is a generational challenge, but one that is vital to the country’s future.
Wildfire Liability: Utilities Under Siege
Buffett acknowledged past structural mistakes with PacifiCorp, particularly not separating operations by state, which complicated risk management. Wildfire risk, while not fully eliminable, can be reduced through operational improvements, such as better asset maintenance and system hardening. A major shift has been the recognition of the need to deenergize power lines during high-risk events—something previously resisted due to a culture focused on keeping power on.
The financial and legal risks from wildfires have grown beyond what utilities were originally structured to handle. Utilities like Berkshire Hathaway Energy (BHE) now face uncompensated risks that far exceed their regulated returns. This has led to calls for clearer legislation on liability and damages, as companies cannot act as the insurer of last resort.
Buffett emphasized that some problems may be unsolvable under current conditions, and in such cases, exiting may be the best option. The valuation drops in BHE—from $87B in 2022 to $48.8B in 2024—reflects not just company-specific issues but broader industry challenges, including regulatory unpredictability and state-level legal risks. The once-attractive utility sector is now seen as less investable, with examples like Hawaii and California wildfires highlighting the escalating liabilities.
Buffett and Abel both stress the need for a smart national energy policy, combining government leadership with private enterprise, similar to wartime mobilization. However, in a democracy with fragmented interests, achieving this kind of unified action remains a major challenge.
Insurance: GEICO Turnaround & Industry Landscape
GEICO is in the midst of a strong turnaround under Todd Combs, driven by better risk-based pricing and rapid progress in telematics. A major cost-saving move—cutting 20,000 jobs—has saved $2 billion annually. These improvements helped GEICO earn $1 billion in Q1 2025, while continuing to provide $39 billion in float for Berkshire to invest. Buffett reaffirmed GEICO’s timeless model: sell a simple product, price it right, and stay disciplined.
Life Insurance: Berkshire avoids competing in this space, where private equity firms pursue spread-driven strategies that rely on stable markets and low credit spreads. Buffett warned of potential liquidity risks and regulatory pushback, noting that the risk-reward tradeoff is poor for long-term capital allocators like Berkshire.
AI & Autonomous Vehicles: AI is reshaping insurance—from risk assessment and pricing to claims handling. While autonomous vehicles may lower accident frequency, they could raise repair costs due to advanced technology. Long term, insurance may shift toward product liability over traditional auto coverage. Buffett emphasized the need for ongoing adaptability, not rigid forecasts.
Healthcare: The “Tapeworm” on the U.S. Economy
Buffett describes the U.S. healthcare system as a “tapeworm” on the economy—deeply embedded and draining productivity. Despite spending nearly 20% of GDP on healthcare—far more than other developed countries—the system remains resistant to change. Even a high-profile joint effort by major industry leaders couldn’t make a dent, leading Buffett to concede, “The tapeworm won.” While people generally like their doctors, the overall structure is politically protected and entrenched. Meaningful reform is nearly impossible without government action, yet even with political will, major structural change in healthcare remains extraordinarily difficult.
Why Buffett Prefers Equities Over Real Estate
Buffett prefers equities over real estate because stock investing is faster, simpler, and more scalable—allowing billions to be traded in minutes without negotiation—whereas real estate deals are time-consuming, involve multiple parties, and often become more complex after signing. He noted that during the 2008–09 crisis, although some real estate opportunities arose, the time and effort required didn’t compare to the efficiency and returns available in the stock market.
DUE DILIGENCE, MANAGEMENT, QUALITY OF BUSINESS, CAPITAL ALLOCATION & THINKING
Turn Every Page: Diligence, Curiosity, and Serendipity
Being detail-oriented makes all the difference. In investing, Buffett said “one of the most important habits is to ‘turn every page’—to thoroughly examine every aspect of an opportunity. Very few people actually do this. And those who do? They’re not going to tell you what they’ve found. That’s why you have to put in the work yourself.”
- Example 1: When Warren Buffett first met Jay Pritzker, he was just 24 and Jay was 29. They were the only two who showed up to a Rockwood Chocolate meeting in a rundown Brooklyn building, and Jay gave Buffett an impromptu lesson on the tax code.
The meeting was about splitting off two chocolate businesses from Rockwood Chocolate in a way that would allow the company to realize a large gain on cocoa inventory without paying roughly 50% in federal taxes.
- The 1954 U.S. tax code introduced provisions that allowed companies to avoid capital gains tax on inventory appreciation under certain conditions (e.g., holding multiple businesses for 5+ years and restructuring them).
Jay Pritzker was an entrepreneur, co-founder of the Marmon Group, and co-founder of a global hospitality brand. Berkshire Hathaway acquired controlling interest in Marmon in 2007 and became sole owner in 2013.
A major confectionery company recently warned of a weak quarter, citing a sharp rise in cocoa prices—now around $4.50 per pound—driven by supply issues in West Africa. The surge in costs is pressuring margins, especially under their LIFO (Last-In, First-Out) accounting method, which reflects the current high input cost in reported earnings
- Example 2: In 1950, a spontaneous meeting with Lorimer Davidson, the GEICO executive, on a quiet Saturday changed Buffett’s life. That unexpected meeting turned into a life-changing moment, teaching Buffett the value of curiosity, hard work, and seizing lucky breaks—what he calls “turning every page.”
- Example 3: Greg Abel met Warren Buffett on a Saturday morning during Berkshire’s review of MidAmerican Energy. While Greg expected general business questions, Buffett immediately focused on derivative contracts on the balance sheet—small but risky—showcasing his sharp attention to financial exposure, especially in the post-Enron era.
How to Ask Management Questions Effectively
Warren Buffett suggests bypassing traditional Investor Relations (IR) departments, which he criticizes as mere sales arms for the company’s stock, often lacking in honest insight. Instead, he recommends doing your own analysis and, when possible, asking thought-provoking questions directly to management:
- “If you had to own one competitor’s stock for the next 10 years, which would it be and why?”
- “If you had to short one competitor’s stock, which would it be and why?”
These questions are powerful because they:
- Reveal true industry insights.
- Highlight competitive strengths and weaknesses.
- Encourage candid responses, as people often speak more freely about rivals.
Buffett’s core message: Don’t rely on IR spin—dig deeper, think independently, and ask smart questions.
The Power of a Good Manager
Buffett believes that a leader’s behavior is contagious—if a leader cuts corners or acts in self-interest, that attitude can spread throughout the organization. That’s why it’s essential to have managers who act with integrity and discipline, and who prioritize the business over personal gain.
Greg Abel on Capital Allocation
Reputation First: Maintaining the strong reputation of Berkshire and its subsidiaries is a top priority.
Cash as a Strategic Asset: Berkshire holds significant cash reserves, which are viewed as a powerful strategic advantage.
Financial Independence: The company aims to remain self-reliant, avoiding dependence on banks or external parties.
Strong Cash Flow: Operating companies, including insurance and non-insurance businesses, generate substantial annual cash flows.
Internal Investment Focus: Capital allocation starts with evaluating opportunities within Berkshire’s existing businesses to ensure they are well-capitalized and positioned for growth.
Quality of Business & more capital-intensive Mega 7
Buffett emphasizes that the best businesses generate high returns with low capital investment. Magnificent 7 tech companies, once known for capital-light models, are becoming more capital-intensive due to heavy investments in AI infrastructure—data centers, chips, and cloud computing.
Balance Sheet First: Buffett’s Analytical Preference
Buffett prefers to study the balance sheet over the income statement, believing it’s harder to manipulate and better reflects a company’s long-term financial health. He often reviews balance sheets over an 8–10 year period before even looking at earnings. In contrast, Wall Street tends to focus on short-term income figures. While both financial statements are important, Buffett stresses that a deep understanding of a company requires examining both.
“Fewer, Better Bets: Munger’s Philosophy and Buffett’s Skepticism”
Charlie Munger often said that making just five truly good decisions in a lifetime could lead to better outcomes than making fifty. He believed most investors lacked sufficient concentration.
Warren Buffett, reflecting on this, noted that his natural instinct is to be critical and skeptical—always looking for what might be wrong or missing. He emphasized that successful investing depends as much on avoiding errors as it does on identifying opportunities.
True Understanding: Munger’s Standard for Thinking
Buffett recalls that Charlie Munger was never satisfied with superficial knowledge. Munger believed that true understanding requires knowing both sides of an argument. He often told Buffett: “Don’t take a position on anything unless you can argue the opposing view better than the person you’re debating.” That intellectual rigor defined Munger’s thinking and deeply influenced Buffett’s approach.
MISCELLANEOUS
Making Friends and Choosing Associations
Your Circle Shapes You – Buffett emphasizes that who you associate with profoundly influences your life. Your personal and professional trajectory tends to follow the direction of the people you admire, work with, and befriend. He advises seeking out people who are better than you – in character, intelligence, and values – because their influence will elevate you. Don’t chase people just because they’re rich or successful. Instead, look for those who do more than their share and don’t seek extra credit—people with integrity and humility. Just like money, good intentions and good behavior compound over time. But the reverse is also true—negative associations can drag you down. Make the most of the people who help you grow—and don’t be afraid to let go of those who don’t.
Born Lucky: Buffett on the Power of Birthplace
Warren Buffett says the luckiest day of his life was being born in the United States—a country that accounted for only 3% of global births at the time. He emphasizes how this starting point shaped his opportunities. He also notes that two key Berkshire leaders, Greg Abel and Ajit Jain, were born abroad but now live and thrive in the U.S., highlighting the country’s continued promise for talent from anywhere.
The Cathedral and the Casino: Two Sides of Capitalism
Buffett draws a sharp distinction between two forces in capitalism. The “Cathedral” represents the real economy—businesses that produce goods, create jobs, and improve lives. The “Casino” symbolizes the speculative side: financial engineering, short-term trading, and hype that enrich a few without adding lasting value. While the casino may seem fun or seductive, Buffett warns that the long-term health of the economy depends on keeping the cathedral strong. His hope: that over the next 100 years, the U.S. ensures the Cathedral doesn’t get overtaken by the Casino.
Books: Informal Teachers of the Best Kind
Buffett often says that books were his most powerful informal teachers. He read every investment book he could find, and Munger remarked that through reading, they had already “had lunch” with history’s greatest minds. As Buffett put it: “I could spend 10,000 hours tap dancing, and you’d throw up if you watched me. But if I spent 10 hours reading Ben Graham, I’d be damn smart when I was done.”
Why Investing Is Easier Than Operating
Buffett believes it’s much easier to be an investor than a business operator. Operators must manage people, solve problems daily, and take on constant responsibility. By contrast, Buffett enjoys the privilege of allocating capital, choosing how to spend his time, and selecting the people around him. That kind of freedom, he says, is rare for most business operators—and one of the great luxuries of his investing life.
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