Introduction
Intentionally, this Podcast starts out with my voice talking about Euphoria and it ends up getting swallowed by the music of the jungle - the market.
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THE LETTER
A couple weeks ago, I was reading a letter from May 29, 1969.
This is what it said...
"...personal considerations were the most important factor among those causing me to modify our objectives. I expressed a desire to be relieved of the (self-imposed) necessity of focusing 100% on BPL. I have flunked this test completely during the last eighteen months. The letter said: "I hope limited objectives will make for more limited effort." It hasn't worked out that way. As long as I am "on stage", publishing a record and assuming responsibility for management of what amounts to virtually 100% of the net worth of many partners, I will never be able to put sustained effort into any non-BPL activity. If I am going to participate publicly, I can't help being competitive. I know I don't want to be totally occupied with out-pacing an investment rabbit all my life. The only way to slow down is to stop.
Therefore, before yearend, I intend to give all limited partners the required formal notice of my intention to retire."
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The letter I just read to you was written by Warren Buffett... The world's 2nd richest man...
Fast forward to May 5th, 2006... I'm on an airplane heading to the Berkshire Hathaway Annual Meeting...
My trip to Berkshire Hathaway started at the Nashville, TN airport, but things didn't start getting interesting until I got to Memphis, TN. It was there that I boarded the plane to Omaha, NE. One after one, people got on the plane. One guy with Benjamin Graham's "Security Analysis" book, another with Benjamin Graham's "The Intelligent Investor", another with Robert Hagstrom's "The Warren Buffett Way", and on and on. In hindsight, I think the entire flight was full of Berkshire Hathaway investors because I saw a bunch of them throughout the weekend at various events.
When the plane was landing, I was talking to a guy and his wife. He's been a Bershire shareholder since the early 1990's and this was his seventh visit to Omaha. He said he had to thank Warren because he did a lot of great things for him.
For me, it was my first visit and the excitement of the trip only allowed me four hours of sleep the night before.
I picked up my rental car at the Hertz place - a Pontiac Vibe. It was a nice car that got me around the city with ease.
THE FRENCH CAFE
At 11:15 AM, my first stop was the French Cafe in the historic district. The restaurant opened in the 1960s and had those sixteen foot ceilings. I ordered a beef tenderloin sandwhich and a quadruple Dewar's. Then I started asking the bartender and manager about the city and about Warren Buffett.
They said Buffett showed up the night before around 6-6:30 PM for pictures with friends. He ordered a Cherry Coke and stayed for about 30 minutes. They also said he was going to show up Saturday night to eat there. The bartender said it's intimidating to serve his table because he's so admired and everyone runs around frantically.
BERKSHIRE HATHAWAY HEADQUARTERS
From there, I went to Berkshire Hathaway's main headquarters. I didn't get the chance to go inside, but I did get some pictures of the building from outside.
BUFFETT'S HOUSE
Then I swung by Buffett's house for a few pictures. It's amazing he's been in the same house since 1958. People could drive into his driveway if they wanted to, but I'm not sure what happens after you do. I wasn't about to find out.
HOUSE
For a guy worth $50 BILLION, you would think he'd have heavier security around his house.
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YELLOW BRKer PARTY
At 4:30 PM, I showed up for the now-famous Yellow BRKer party. It was another opportunity to talk to other Berkshire shareholders.
I met some interesting people there and learned a few things.
One guy asked me what stocks I was holding, so I ran down the list: ACAS, APA, APT, ARLP, AZO, BBBY, BRKB, COF, CVX, DELL, DG, DVN, ET, FRX, HD, HDI, JNJ, KOF, LPNT, LXK, MVK, PSUN, SKM, SPF, WMT.
He was concerned about DELL. He thinks Lenovo is the lowest cost provider and will give DELL high competition in the international space - the place where all the growth opportunity is. He suggested I research Lenovo some more.
He thought the ET has already run it's course. I agreed, but I've already sold off major portions of my holdings after I doubled my money. The remainder is still up +150%.
I told him I was concerned about FRX because they might be too concentrated in too few products.
He liked the JNJ, but said LXK probably won't be going anywhere.
For SPF, like most of the people I talked to there, they said homebuilding has run it's course and it's time to get out.
They were interested in BUD and think it's a great buy. I told them I reviewed BUD, but felt their debt level was too high. I didn't think BUD could get out of debt within five years.
I also asked them if Buffett still owned the billion ounces of silver that he bought at $4/ounce. They said they thought he sold it, and I later found out at the annual meeting that Buffett did sell it a while back for a small profit. Today, silver is trading at $13/ounce. Buffett wishes he held, but he admits it's impossible to get out at the peak all the time.
ROBERT MILES SPEECH - "The Genius of Warren Buffett"
At 6:30 PM, I show up at Roskens Hall. I run into another shareholder outside and he points me in the direction of where I should be going for the speech because I couldn't find the auditorium.
Later, I find out, this guy was the teacher from the University of Tennessee that introduced Buffett to Clayton Homes. Before Mr. Miles gives his presentation, this man gets up and starts talking about his Buffett visit.
He said he wrote to Buffett and told him he had an article about Ben Graham that he wanted to publish. Buffett said he couldn't help him. They asked Buffett to come to Tennessee and Warren said he'd visit if he ever had business in the area. They kept talking back and forth (I'm guessing over months or years), and since Buffett didn't have any business in Tennessee, the Tennessee crew said they'd go to Buffett to meet him if it was OK.
So when they gave Buffett the book about the Clayton Homes owner as a gift, Buffett bought the company and gave all the students a B share, and the teacher an A share.
It was really interesting to listen to the teacher because he was full of enthusiasm. In fact, numerous people, throughout the entire weekend, were very proud to be Berkshire shareholders.
The Miles speech was equally interesting. Miles said that when the big opportunities come about, you should load up, just like when Buffett bought GEICO or the Washington Post. Miles said Buffett bought the Washington Post with a 20% Margin of Safety.
Miles said that Buffett is a genius in four things: Calculating numbers, and 3 other things which I forgot.
He said Buffett has the calcuation ability of Albert Einstein, the thriftiness of Benjamin Frankin, and the folksy penmanship of Mark Twain.
He said that Buffett runs on a treadmill for an hour per day to keep his body in shape and plays Bridge for 12 hours per week to keep his mind in shape.
He said Buffett can read five books per day if he wanted to, and that he is extremely intelligent.
He said Coke paid Buffett $125,000/year just to be on the Board of Directors. Recently, we heard that Buffett resigned from his position citing lack of time.
Buffett keeps his car for 10 years. When he got rid of his last car, it only had 35,000 miles on it.
He receives 250-300 letters per day from people around the world.
BORSHEIM'S
Inside the tent
At around 8:30 PM, I showed up at Borsheim's. They had a huge tent. Inside was a band, and bartenders serving drinks, and some finger food. They also had a bar made out of ice with liquor bottles suspended inside the ice. It was neat.
All the liquor was free. I imagine, they get everybody loaded and then they go inside and drop a ton of money on jewelry. When I went inside the store - it was huge and full of people. When I walked through the store, I entered into the mall area where it was full of people talking and having a great time. There were bartenders everywhere serving anything you wanted.
HOTEL
At 11:30 PM, I jumped in bed, watched TV and fell asleep around midnight. When the wake-up call rang at 4:00 AM, I couldn't get up, so I slept for another hour or so.
ANNUAL MEETING
You've got to get up early to get to the Qwest Center if you want a good seat
At 5:45 AM, I arrived at Qwest Center. The doors didn't open for another 75 minutes, but there were already 200 people in line and I showed up at the perfect time - any later and the line got really, really long. The building is impressive and the people in line were very nice. We chatted about stocks and the real estate market for about an hour. Once again, people were negative on the real estate market.
A camera crew came up to me an interviewed me for five minutes. It was kinda funny. One question they asked me was, "If you could ask Warren Buffett one question, what would you ask him?" I thought about it for a second, then said, "I'd ask him what's the next stock he's going to buy". hehe
It was cold standing outside, even in a thick long-sleeve shirt. People from Justin's Boots were out passing cups of coffee. When a couple thousand people were in line, a couple anti-abortion protesters came out in full force showing huge pictures of aborted fetuses - it was kinda gross at 6:30 in the morning.
When 7:00 AM came around, the doors opened up, and people started running inside. They ran, and ran, and ran, down a hallway and up a flight of stairs to get into the meeting area. Once inside, they started reserving their seats. It was a madhouse. Luckily, I got a front row seat on the side: Sec 121, Row A, Seat 5.
I was talking to the guy next to me that was a CPA. He's been there several times. He said they issued 61,000 passes in 2005 and 77,000 passes in 2006 for the event. The place only seats about 20,000 people.
A couple minutes before the movie begins, a bunch of bodyguards come walking out Warren Buffett and he takes a seat to watch the movie. He was only 20 feet away from me. It was amazing and I was smiling from ear to ear.
The meeting starts out with what felt like an hour-long movie. It was produced by Susie Buffett - Warren's daughter. It was a comedy which had numerous clips: a cartoon about Warren, Charlie, and the See's Candy CEO, as judges in an American Idol spoof called "Omaha Idol". The cartoon featured the likeness of Steve Jobs, Snoop Dogg, Oprah Windfrey, Bill Gates, Arnold Schwarzenegger, and other people.
Then, they show a clip of Warren Buffett who's calling Charlie Munger to tell him to "Buy Internet Stocks!"....ahhahaa... In real-life, Warren wouldn't do that because it's outside his circle of competance. Charlie's on the other end of the phone, saying "No! No! No!". Then Warren calls Jamie Lee Curtis, who's sitting in bed, talking to Warren on the phone. Warren convinces her to call Charlie up and convince him to buy Internet stocks. Jamie calls Charlie up, and Charlie says something like, "I think Warren must have misunderstood me. I agree, we should buy Internet Stocks". It was funny to hear them talk about that.
Then Ellen DeGeneres gave a tour of the See's Candy manufacturing facility and had a little too much fun with the candy.
Interwined with the comedy clips were advertisements of several of the businesses that Berkshire owns: Dairy Queen, Coke, Geico, and many others. It was like watching a comedy movie with a bunch of advertisements, but the bittersweet thing about watching advertising was.... we all OWNED a portion of these companies.
The funniest part of the movie is when they had the four girls from Desparate Housewives sitting around a card table talking about the man they want to marry. They were trying to decide whether they'd marry for love or for money. Three of the girls would rather marry for love, but Nicollette Sheridan said, "Why marry a Millionaire, when you can have a Billionaire?" She pulls out Charlie Munger and he's sitting around the table with them. It was hilarious because Charlie's like 80 years old and he's got really thick glasses.
Later, Buffett was joking about how she pulled an Anna Nicole Smith move and that, "When choosing between old rich guys, pick the older one."
The movie also featured a clip from Buffett's congressional testimony about Solomon Brothers and how if one of the 8,000 employees loses money for the company, that's OK, but to lose a shred of reputation it's unacceptable.
After the movie, Buffett and Munger introduced the Board of Directors. Bill Gates was sitting front and center. Buffett and Munger then proceded to answer questions from the audience.
http://users.rcn.com/hpersson/BRKA_Meeting_Notes-2006.pdf
Instead of going in-depth on everything Buffett said, I'm going to give you the highlights:
Buffett is pumped up and excited about his recent purchase of Iscar Metalworking for about $5 Billion. He kept saying that shareholders should be rewarded in five to ten years down the road.
Buffett is going to Israel in September to look at similar businesses to buy.
Buffett also talked about how not all businesses are attractive to him. That the owners of some businesses have big heads and want big dollars. He said he's in the middle of one such deal, and he think it's a mismatch and he will walk away, but he wants to talk to this guy so he can learn all he can from him. It was an interesting comment because it's almost as if he's an alien who walks around and sucks out the brains of everyone he speaks to.
Buffett talked about the Forest River CEO's annual letters. I think the guy wrote a book and it's recommended reading.
Warren says he's not interested in Internet stocks because he doesn't have good visibility of what an Internet company would look like in 5-10 years. He says he likes companies that will look a good bit the same 5-10 years down the road as they do now.
Buffett says there's no question that ethanol usage will grow. Munger says he doesn't like ethanol because it takes more energy to make ethanol than what you get out of it.
They both talked about how copper has gone from 70 cents to $3.50 and how oil has gone from $10 to $70.
Buffett said, "It begins with fundamentals and then it turns into speculation. What the wise man does in the beginning, the fool does in the end."
Buffett said once people get envious about something that is hot (like commodities and housing), nobody can determine the peak because it's unknown how outrageous the prices can go.
One person asked if it's a good time to buy Berkshire Hathaway stock. Buffett said, "No". They don't just go out and buy stocks of companies they love. They Will only buy stock when the price is right.
Around that time, I was getting tired. I had 4 hours sleep the past two days, so I went to the shopping area where all the companies feature their products - some are selling stuff and others were not.
EXHIBIT AREA
I go downstairs to the exhibit area and got some lunch. To my amazement, the place is jam-packed with people. There's an overflow set up in 3 locations with large-screen TVs and chairs all over the place. Thousands of people had to watch it from this area.
I go to the bookstore and found several DVDs worth buying.
I also met Janet Lowe there. I've already got three of her books, "Value Investing Made Easy", "Warren Buffett Speaks", and "Damn Right" which is a story about Charles Munger. I asked her why they didn't have "The Rediscovered Benjamin Graham" book there, and she said I could find an autographed copy of it at the Marriott near Borsheim's.
Meanwhile, Buffett was still on stage talking... I kept passing TVs with a bunch of people sitting around them, taking notes, and watching. I must have missed another 45 minutes of it, but I already know so much about him, that a lot of the things he was saying was a duplication of effort.
I picked up a couple more things, then headed over to the Marriott to buy Lowe's book.
NEBRASKA FURNITURE MART
At 6:30 PM, I woke up and headed over to NFM. The place was jam-packed - probably a thousand people were there. The lines were long. Inside, I got to eat some of Warren's favorite things: a Hamburger, Cherry Coke, and a Dairy Queen Dilly Bar. I watched some people play Warren's favorite game: Bridge, saw his favorite color: Red, and heard his favorite music: Dixieland. His favorite place to live is Omaha. There were three other of Warren's favorite things there, but I didn't see them.
I also walked around the Nebraska Furniture Mart. They had an 82-inch flat panel screen that was selling for over $100,000. It was huge.
This was probably the worst part of the trip, but it could have been because I was so tired. I packed in a lot of things to do while I was there. In less than 45 hours, I toured a beautiful city and had a great time.
I just might go again next year.
(If you want to see the pictures and other things, visit this link:)
http://www.Lawrenceburg.com/buffett/
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RECENT TRADES
Symbol Name Bought BuySharePrice DateSold SellSharePrice DaysHeld Profit% Annualized%
PTEN PATTERSON-UTI ENERGY, INC. 2006-06-22 $26.50 2006-06-23 $27.43 2 3.50% 638.75%
COP CONOCOPHILLIPS 0.665780 2006-06-22 $60.08 2006-06-23 $62.01 2 3.20% 584.00%
JOSB JOS. A. BANK CLOTHIERS 2006-06-20 $22.29 2006-06-21 $24.35 2 9.19% 1,677.18%
MVK MAVERICK TUBE CORP 2006-02-27 $47.46 2006-06-15 $62.95 109 32.65% 109.33%
MVK MAVERICK TUBE CORP 2006-03-10 $44.61 2006-06-15 $62.95 98 41.11% 153.11%
MVK MAVERICK TUBE CORP 2006-05-15 $52.88 2006-06-15 $62.95 32 19.06% 217.40%
MVK MAVERICK TUBE CORP 2006-05-24 $46.12 2006-06-15 $62.95 23 36.49% 579.08%
EBAY EBAY INC. 2006-05-08 $31.65 2006-05-26 $33.94 19 7.20% 138.32%
ACAS AMERICAN CAPITAL STRATEGI 2005-04-29 $31.59 2006-05-24 $33.91 391 7.36% 6.87%
ACAS AMERICAN CAPITAL STRATEGI 2006-01-17 $35.55 2006-05-24 $33.91 128 -4.60% -13.12%
ACAS AMERICAN CAPITAL STRATEGI 2006-01-30 $34.99 2006-05-24 $33.91 115 -3.10% -9.84%
ACAS AMERICAN CAPITAL STRATEGI 2006-02-24 $36.35 2006-05-24 $33.91 90 -6.70% -27.17%
BRKB BERKSHIRE HATHAWAY INC 2006-05-08 $2,982.00 2006-05-24 $3,070.18 17 2.93% 62.91%
ACAS AMERICAN CAPITAL STRATEGI 2006-05-09 $33.97 2006-05-24 $33.91 16 -0.18% -4.11%
SKM S K TELECOM CO LTD 3/24/2006 $23.08 5/17/2006 $26.01 55 12.72% 84.41%
JNJ JOHNSON & JOHNSON 12/13/2005 $60.05 5/16/2006 $60.41 155 0.60% 1.41%
CVX CHEVRON CORP. 12/28/2005 $56.47 5/16/2006 $60.62 140 7.33% 19.11%
CVX CHEVRON CORP. 1/30/2006 $60.00 5/16/2006 $60.62 107 1.00% 3.41%
JNJ JOHNSON & JOHNSON 2/2/2006 $57.88 5/16/2006 $60.41 104 4.35% 15.27%
SKM S K TELECOM CO LTD 3/24/2006 $23.08 5/16/2006 $25.79 54 11.75% 79.42%
SKM S K TELECOM CO LTD 4/10/2006 $23.40 5/16/2006 $25.79 37 10.20% 100.62%
SKM S K TELECOM CO LTD 2/27/2006 $24.55 5/16/2006 $25.79 79 5.00% 23.10%
LXK LEXMARK INTERNATIONAL 8/26/2005 $62.99 5/10/2006 $52.40 258 -16.84% -23.82% *small amount
LXK LEXMARK INTERNATIONAL 12/13/2005 $47.13 5/10/2006 $52.40 149 7.88% 19.30%
LXK LEXMARK INTERNATIONAL 3/22/2006 $45.50 5/10/2006 $52.40 50 15.12% 110.38%
CVX CHEVRON CORP. 1/17/2006 $61.33 5/10/2006 $62.49 114 1.87% 5.99%
LXK LEXMARK INTERNATIONA 12/13/2005 $47.13 5/8/2006 $52.65 147 11.67% 28.98%
CVX CHEVRON CORP. 1/17/2006 $61.33 5/8/2006 $61.53 112 0.29% 0.95%
COF CAPITAL ONE FNCL CORP 2/2/2006 $82.90 5/8/2006 $86.02 96 3.73% 14.18%
LPNT LIFEPOINT HOSPITALS, 2/6/2006 $30.27 5/8/2006 $33.14 92 9.47% 37.57%
DVN DEVON ENERGY CORPORAT 2/23/2006 $60.53 5/8/2006 $61.59 75 1.73% 8.42%
SKM S K TELECOM CO LTD 2/27/2006 $24.55 5/8/2006 $27.76 71 13.06% 67.14%
BBBY BED BATH & BEYOND INC. 3/2/2006 $36.30 5/8/2006 $38.55 68 6.17% 33.12%
SPF STANDARD PACIFIC CORP 3/10/2006 $31.55 5/8/2006 $31.97 60 1.29% 7.85%
LXK LEXMARK INTERNATIONAL 3/22/2006 $45.50 5/8/2006 $52.65 48 15.69% 119.31%
KOF COCA COLA FEMSA SA DE 4/10/2006 $32.99 5/8/2006 $34.05 29 3.20% 40.28%
ARLP ALLIANCE RESOURCE PAR 2/27/200+6 $37.05 5/8/2006 $42.07 71 13.51% 69.45%
DVN DEVON ENERGY CORPO 2/9/2006 $60.47 5/2/2006 $63.11 83 4.34% 19.09%
ARLP ALLIANCE RESOURCE 2/27/2006 $37.05 5/2/2006 $42.86 65 15.63% 87.77%
ET E TRADE GROUP INC 4/21/2005 $10.60 4/18/2006 $26.01 363 145.37% 146.17%
MBT MOBIL TELESYSTEMS 4/3/2006 $33.21 4/18/2006 $33.44 16 0.68% 15.51%
YCC YANKEE CANDLE 4/10/2006 $27.39 4/18/2006 $28.55 9 4.20% 170.33%
LEN LENNAR CORP 5/2/2005 $51.15 4/10/2006 $61.27 344 19.76% 20.97%
MSFT MICROSOFT CORPORATION 12/13/2005 $27.21 4/10/2006 $27.29 119 0.27% 0.83%
PHM PULTE CORP 4/3/2006 $38.24 4/10/2006 $40.76 8 6.58% 300.21%
WHI W HOLDING COMPANY INC 4/28/2005 $8.72 3/22/2006 $7.88 329 -9.59% -10.64%
NOK NOKIA CORP 8/26/2005 $15.44 3/22/2006 $20.49 209 32.69% 57.09%
RCII RENT-A-CENTER INC. 8/29/2005 $20.03 3/22/2006 $24.29 206 21.25% 37.65%
RCII RENT-A-CENTER INC. 1/30/2006 $20.29 3/22/2006 $24.29 52 19.65% 137.93%
WHI W HOLDING COMPANY INC 3/10/2006 $7.29 3/22/2006 $7.88 13 8.07% 226.58%
RCII RENT-A-CENTER INC. 6/13/2005 $23.96 3/22/2006 $24.29 283 1.63% 2.10%
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SELLING HIGH
Check out these links for discussions on my thought process about Selling High and Buying Low:
http://www.gurufocus.com/forum/read.php?2,1565
http://www.gurufocus.com/forum/read.php?2,1793
HOME DEPOT - HD
http://finance.yahoo.com/q?s=hd
http://quicktake.morningstar.com/Stock/Income10.asp?Country=USA&Symbol=HD&stocktab=finance&pgid=qtqnnavfinstate
RESEARCH PAPER WRITTEN 20-YEARS AGO
http://www.aistockbot.com/Michael-Salvucci-1986-Sound_Investment_Strategy.pdf
