Car insurance as a billion-dollar profit machine and unwavering belief in Apple: seven lessons from Warren Buffett

On Saturday, Berkshire Hathaway, Warren Buffett’s investment vehicle, organized its well-attended annual meeting. Seven lessons from the comments of the super investor, who has turned Berkshire into an unprecedented billion-dollar profit machine but is not in a hurry to put his soon-to-be 200 billion cash mountain to work.

Berkshire appeared on the sidelines of the annual meeting

with a figures update for the first quarter of 2024. These results underlined what an impressive profit machine Buffett’s billion-dollar conglomerate has become in 2024. Operating profit for the first quarter amounted to $11.2 billion, compared to $8.1 billion (+39%) in the same period last year.

The insurance activities are still the backbone of Berkshire Hathaway. Auto insurer Geico – the second largest insurer in the US – alone contributed almost $2 billion to profits in the first three months of 2024. It is therefore not surprising that Ait Jain, who oversees the insurance branch of Bekrshire Hathaway, was given a place on the podium on Saturday next to CEO Warren Buffett and his appointed successor Greg Abel.

Because Berkshire Hathaway’s annual meeting would be Buffett’s first public appearance this year, there were some questions in advance about the health of the world’s most celebrated investor. But Buffett has certainly not lost any of his mental sharpness. As always, during the general meeting, Buffett took the time to answer the barrage of questions from the Berkshire shareholders, something that the super investor visibly enjoyed.

As expected, Buffett opened the annual meeting with an ode to Charlie Munger, Warren Buffett’s long-time business partner and friend who passed away at the end of last year. Although it took some getting used to for the stock market guru to answer investor questions without Munger at his side – on one occasion Buffett incorrectly referred to ‘Charlie’ when he wanted to pass the word to Greg Abel, the new number two in the pecking order – Buffett is on his 93rd at the peak of his powers.

Berkshire Hathaway’s stock price will be at a record high in 2024. Buffett’s 15% stake in the conglomerate is worth about $130 billion today.

Possibly the biggest news was Berkshire’s stake in Apple

reduced by about 13 percent in the past quarter. Berkshire also sold a package of Apple shares at the end of 2023. In doing so, Buffett takes some of the significant gains that Apple shares have delivered since 2016.

Nevertheless, the iPhone maker remains by far the most important holding in Berkshire Hathaway’s listed portfolio, something that, according to Buffet, will not change anytime soon: “The iPhone is perhaps the greatest product of all time,” Buffett underlined on Saturday. ‘Just look at how addicted consumers are to their iPhone. And I think CEO Tim Cook is the suitable successor to Steve Jobs.’ Buffett indicated that Cook had previously been informed about the share sale.

After the first quarter of 2024, Berkshire was sitting on a mountain of cash of no less than $182 billion. “By the end of the current quarter, Berkshire’s cash pile will likely exceed $200 billion,” Buffett said. The super investor is not in a hurry to put that cash to work.

“We would like to spend it, but we will only do so if we see investment opportunities that carry little risk and can make us a lot of money.” And those opportunities are apparently scarce. Moreover, due to the enormous scale at which Berkshire operates today, there are only a limited number of companies in which it can invest.

The master investor admitted that he knew ‘nothing about artificial intelligence’ and therefore did not invest in it. Nevertheless, Buffett pointed out the potential dangers of the technology. ‘I recently saw an AI image of myself that was so realistic that I almost transferred money to scammers on the other side of the world. But the genie is out of the bottle. I don’t know if AI is good or bad.’

Buffett is not very concerned about the growing debt of the US government and states that there is still no credible alternative to the dollar as the world’s reserve currency. According to him, the American debt is far from unmanageable. In this way he remains true to his distinctly American home bias. Without American companies he would never have become the most successful investor ever.

Although Buffett still looked very fresh last weekend, the old fox realizes ‘that he should no longer sign four-year contracts.’ In any case, follow-up is assured. For the first time, Buffett confirmed that Greg Abel, the Berkshire CEO’s longtime dauphin, will have the final say in investment decisions when Buffett steps down or dies. Abel, 61, currently heads Berkshire Hathaway’s non-insurance business.