Brown Advisory Fund

Berkshire Hathaway 2016 Annual Meeting

Across the aisle on a flight to Omaha on the last weekend in April 2016, a silver-haired gentleman in a tailored suit sat reading the Berkshire Hathaway Annual Report. Young professionals dressed in varying degrees of business casual were scattered throughout the plane, discussing topics from Warren Buffett’s most recent annual letter. From that moment, we knew that we were about to be thrown into a carnival of all things Berkshire, a one-of-its-kind “Woodstock for Capitalists,” as Buffett himself often characterizes the annual meetings.  

We are financial analysts in the Washington College Brown Advisory Student-Managed Investment Fund Program and earned a trip to the 2016 Berkshire Hathaway annual shareholder meeting to discover what makes the company revered worldwide and also to consider the stock as a potential investment for the Fund. Richard Bookbinder P’10, the program’s volunteer advisor, and his wife, Arlene Bookbinder P’10, traveled to Omaha to participate in the annual meeting along with us.   The competition to attend the annual meeting consisted of writing an essay focused on the 2014 and 2015 Berkshire Hathaway Annual Reports, Warren Buffett, and other relevant information pertaining to the details in the reports.  Through a blind evaluation process, Mr. Bookbinder, along with faculty advisor, Dr. Hui-Ju Tsai, and Business Management Department Chair, Susan Vowels, selected the best essays submitted by members of the program based on level of in-depth analyses of the annual reports including the impact of climate change, crumbling infrastructure, the relationships between prosperity and productivity, and varying factors in the performance of the stock.    Meeting weekly early on Wednesday mornings throughout the school year, the 25 students in the Brown Advisory Student-Managed Investment Fund Program actively manage a portfolio that achieved a September 2016 market value of over $700,000 with 35 different equity positions. 

Landing in Omaha Friday morning of meeting weekend, we hit the ground running and immediately went to the Berkshire Hathaway Exhibition located in the same convention center as the Saturday all day meeting. The exhibition hall was an overwhelming display of all things Berkshire, featuring favorites such as Coca Cola and See’s Candies, new acquisitions such as Marmon and Precision Cast Parts, as well as all kinds of Berkshire merchandise, including Warren Buffett T-shirts and Berkshire boxers.  We took in the entire experience, eating Dilly Bars and posing for pictures at the various stalls and exhibits including the GEICO Gecko, as well as chatting with Justin Boots’ representatives and Kraft-Heinz mascots.  The sight of college students in a mostly older crowd intrigued a local Omaha Fox42 reporter covering the event, who approached and interviewed us about our presence at the “Super Bowl” of the investment world.  A video and comments from Jonathan and Audrey can be found in the news report here (http://fox42kptm.com/news/local/berkshire-hathaway-shareholders-meeting-heres-what-you-can-expect). 

As part of our finance-focused weekend, we were invited to attend a dinner at the Omaha home of Alan Parsow, institutional investor and General Partner at Elkhorn Partners, and a friend of Warren Buffett.  We had the opportunity to mingle with executives and top asset managers from the United States, Canada, and Switzerland in an intimate setting, allowing an environment to ask questions and share ideas regarding the economy as a whole as well as Berkshire’s past performances.  The evening was an incredible experience to closely interact with individuals who controlled billions of dollars, and resulted in a lesson of diversifying a portfolio’s investments for a greater potential to succeed in risky and bearish environments.  

Saturday morning, we were up before dawn to get to the Convention Center in time. Waiting in freezing rain at 5:30 a.m. for the 7:30 a.m. door opening with 40,000 people made us realize the significance of the spectacle we were about to witness, and we spent the time conversing with and learning about the various Berkshire shareholders around us.  As the doors to the Convention Center opened, the thousands of eager shareholders swarmed the entrance, the stampede slowed by the rain that started earlier that morning but made better by free coffee and pastries courtesy of Berkshire. 

The bulk of the day’s events surrounded a multi-hour question and answer period with a break for lunch.  Without a doubt, Warren Buffett and Charlie Munger have been movers and shakers of the stock market, their words influencing investment decisions worldwide.   In-depth questions submitted by the public and selected by a panel of reporters, intermixed with live questions from the audience, resulted in the personalities of the two business moguls shining through.  Quotes, including “I would probably buy back stock a little higher than 1.2”, “It’s (derivatives) still a potential time bomb in the system”, and “If you’re expecting efficiency in higher education, I think you’re howling in the wind!”, showcased their ability to speak to institutional and individual investors as well as to young people seeking advice.    

Taking the advice, we reflected on the atmosphere, culture, and financial position of Berkshire while formulating a decision whether to establish a position in the stock for the Fund or remain watching the trajectory of the price.  When we returned home from Omaha, we reported back to the rest of the Brown Advisory Investment Fund students about our experiences and our opinions on whether the company should be added to the Student Fund.  Deciding to have ownership in a company is a complex decision; there are many moving parts that must be considered.  It’s not as simple as agreeing the trip was amazing and Buffett is an exceptional character. If that were the case, we would have wanted to invest in Berkshire Hathaway without hesitation.  After the class discussed all the pros and cons of being a shareholder of Berkshire Hathaway along with preliminary financial review of the company business model and Berkshire portfolio holdings, a vote was taken by all of the students in the class, and based upon the result,  a decision was made to establish a half position for the Fund (approximately 1.5% of Fund market value) in the company and monitor it closely as Berkshire moves  toward  anticipated future changes in senior management responsibilities.   Since the Fund became an owner of Berkshire Hathaway Class B stock in May 2016, the company’s stock has performed well, proving a wise decision was made.  

Next year, four new members of the Brown Advisory Investment Fund will experience the benefits of attending an annual meeting of a highly regarded publicly traded company, while simultaneously reassessing the stock’s position in the Fund.  We hope that this tradition will continue for many years to come.

Ryan Leigh ’17

Shreyas Suresh ’18

Audrey Utchen ’17

Jonathan Windeborn ’17