Partnership & Trust

Michael R. Graham, Ph.D

Special to Knowledge Bureau Report. In a career approaching six decades,  Dr. Graham prizes his pioneering role in Canadian investment research, and also his many national and international investment contacts. Over his career, Michael has made over 20 “pilgrimages” to Omaha to attend Berkshire Hathaway annual meetings.  Observations from his latest provide wisdoms for the ages.  

Berkshire Hathaway (NYSE/BRK.B – US$278) has been far and away my most enriching investment. And not just in the way one might think.

Financially, yes, as its Class "B" shares have grown to dominate my portfolio enough to necessitate frequent trimming to a holding currently worth over four times its book cost.  In addition are the friends, professional acquaintances and MGIS subscribers I have gained over many years of attending its one-of-a-kind annual meetings. 

But perhaps most of all is what I have learned from the legendary Warren Buffett, 90, and Charlie Munger, 97, his partner of close to sixty years, whose wisdom, wit and worldly perspective continue to inspire even a battle-scarred veteran like me.

This year's (virtual) annual meeting was again highlighted by over three hours of their answering questions on the widest range of topics.  On the investment front they saw it as no accident that five of the world's six top companies by market capitalization are from the U.S., whereas thirty years ago there were none (Berkshire Hathaway ranking tenth on this list).  Hence their reiterated advice to never bet against America, and most definitely not now.  There was much else besides.

We were told of the red flags in crypto currencies like Bitcoin (“worthless artificial gold”). Platforms like Robinhood and stock-trading apps that facilitate “things that are bad for people” are to be avoided.  The same with the special purpose acquisition companies, SPACs, that are springing up everywhere. Finally, there are casino-like stock markets replete with puts, trades, derivatives and manifold gambling impulses. Not for nothing does “Wall Street like to follow the money”. In frenzied times and markets, advice like this couldn’t have been more refreshing.

There were also the merits of hi-tech investing, which they’ve come to accept after long finding it too hard to understand. In recent years, Berkshire has made a hugely profitable investment in Apple, of which it now owns 5.4% - their largest single portfolio holding. They rationalize this investment as consumer related. In all, however, they stand by their time-honoured, longer-term, value approach to investing – and with good reason.

In a pandemic-transformed world in which everything has changed, Berkshire Hathaway and its iconic leaders stand out as constants that have not changed.  And please, may they never change.  "Although our form is corporate, our attitude is partnership" - it’s a creed that takes on added meaning when set against what they've accomplished.  While results may be trailing high-flying stock markets in recent years, and not for the first time are impatient skeptics once again writing Berkshire off, a 20% compounded annual gain in its per share value since inception in 1965 (double the gain on the benchmark S&P 500 index) speaks for itself.

 In addition, those trailing Berkshire results have nonetheless been positive in each of the last five years.  “We don’t want to disappoint those who have left money with us” remains an overriding principle.  No wonder a million-plus shareholders "simply trust us to represent their interests whatever the future may bring".

In recognition of their sunset years, the Berkshire leadership baton is being passed to Greg Abel, 58, a Canadian originally from Edmonton and a nephew of Sid Abel of the famed Detroit Red Wings production line.  Mr. Abel, whom I've met, inspires all the more confidence when he vows that the business-partnership culture instilled by Buffett and Munger throughout the Berkshire group will not be changed.  And neither should it.  Especially with stock markets in uncharted territory, partnership and trust must remain inviolate.

 I can vouch that they are indispensible ingredients at the Knowledge Bureau too!

The Golden Nugget:   When you earn trust by safeguarding and growing a client’s savings, you become blessed with a relationship for life.

Michael Graham heads Michael Graham Investment Services (MGIS), his independent late-career investment counselling firm (www.michaelgrahamis.com).  In a career approaching six decades, he prizes his pioneering role in Canadian investment research, and also his many national and international investment contacts. Over his career, Michael has made over 20 “pilgrimages” to Omaha to attend Berkshire Hathaway annual meetings. He enjoys his association with the Knowledge Bureau. Michael is best contacted by email at michael@grahamis.ca.