Respect your elders

7 May 2017 By

At his annual Omaha gala, the Oracle gave a well-deserved shout-out to Vanguard’s founder. With big slugs of Berkshire Hathaway’s portfolio struggling, including Wells Fargo and IBM, returns are converging with the S&P 500. That makes Buffett’s strategy look more like Bogle’s.

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Berkshire Hathaway Chairman Warren Buffet, 86, and his Vice Chairman Charlie Munger, 93, fielded questions from analysts, journalists, and shareholders for several hours on May 6 at the company's annual meeting in Omaha. In the session, Buffett honored Vanguard founder Jack Bogle’s work in creating passive investment funds, saying he has saved investors “tens and tens and tens of billions” of dollars. He noted later, when asked why he has advised his wife to invest in passive funds, that it doesn’t matter if she doubles or triples her money.

Buffett also faulted Wells Fargo executives for not acting quickly enough when they found out about problems involving the creation of fake customer accounts at the bank. Berkshire is the largest holder of Wells Fargo with a nearly 10 percent stake in the company.

On May 5 Berkshire Hathaway said first-quarter profit declined 27 percent, in part because of a loss from insurance underwriting. Operating profit fell 5 percent to $3.56 billion, or $2,163 per class A share. Analysts were expecting operating profit of $2,666 per class A share, according to Thomson Reuters I/B/E/S. The company’s revenue increased 25 percent in the quarter.

At March 31, book value at the company had increased 3.5 percent since year-end 2017 to $178,073 per share. Approximately 65 percent of the aggregate fair value of the company was concentrated in the equity securities of five companies: American Express, representing $12 billion, Apple representing $19.2 billion, Coca-Cola $17 billion, IBM $11.2 billion and Wells Fargo $27.8 billion.

On May 4, Warren Buffett said Berkshire Hathaway had sold about 25 million shares in International Business Machines. The investment firm owned 8.5 percent of IBM in March.

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