In his highly-anticipated annual letter to shareholders, Warren Buffett, one of the world’s richest people—equally blessed with wit and sagacity (more on that in a bit)—waxed on about the virtues (and blemishes) of the conglomerate he controls, Berkshire Hathaway. Yahoo Finance's Andy Serwer breaks down the details.

Video Transcript

JULIE HYMAN: But first, let's talk about Warren Buffett and talk about that Berkshire letter out over the weekend. Our Editor in Chief, Andy Serwer, is joining us. Now long-time Buffett head, I guess we could say, or Buffett watcher most certainly. And you sort of try to distill what is it, why are we so interested in Warren Buffett? What has given him this track record that he has, which is not unblemished, right? It's not without mistakes. But if you look at the ensemble of it, it is quite remarkable. What did you kind of come up with, Andy?

ANDY SERWER: Well, it came down to one word, Julie, and that is wisdom. And I was sort of trying to unpack that or dissect what the word wisdom is all about. And I kind of came to the realization that it's being really smart, but also being right. In other words, we know a lot of people who are smart and they do stupid things. We know people who are right, but maybe they're just lucky. But if you do those two things, have those two things combined, smart and you're right; you make the right choices, the right decisions, and especially over time. That's the third element, experience. Then you sort of get to be in a pretty select group of people, people who have true wisdom. And I think you could argue and make the case that Warren Buffett is one of those people.

JULIE HYMAN: It's so interesting to me when you talked about wisdom in your piece, right, and that as a nation, perhaps we don't revere that as much as some others. And it also stands in sharp contrast to, you know, what's going on in the broader market right now, right, and the sort of gamification and meme stocks popularity, et cetera, that Charlie Munger spoke to last week when he was quite critical of Robinhood. What do you make of that sort of dichotomy? I mean it is seemingly at odds, right, with the more general zeitgeist.

ANDY SERWER: Well, no doubt. And you know, and you mentioned earlier, Julie, that of course Buffett's track record recently, especially, has not been particularly good. This happens during bull markets. I mean, basically and Myles can talk to you about this. It's a beta thing, right, that you know, of course, you'd expect him to underperform in a roaring bull market, and you hope outperform in a terrible bear market. So of course, when you've got crazy things like this going on, Buffett's going to underperform.

And I think, you know, a lot of people are forgetting what's going on when it comes to SPACs, and crypto, and of course, the meme stocks; is that they're bull market experts. And it's easy to have a great track record when the market's going up. And the market's been a little all over the place this year. But basically we're still very much in a bull market. And so it makes it easy to look wise. It's harder to look wise over time, and especially during a downturn. You know, but it's not really the American way, as you sort of say there Julie, that we kind of like the rogues, and the renegades, and the outrageousness. And that's fine too. But over time, that's going to not probably serve you well as an investor.

BRIAN SOZZI: You know, Andy, you wrote a little bit about this in your weekend newsletter on Buffett. This annual meeting that's coming up will look a little different.

ANDY SERWER: Yeah I mean, first of all, Brian, it's going to be in LA. And that's all about, you know, making sure that Charlie Munger is safe. He's based in LA. And so the thinking is that it's easier for a 90-year-old guy, a.k.a. Warren Buffett, to travel than a 97-year-old guy, a.k.a. Charlie Munger, who's in LA. So they're going to move the core Berkshire executives from Omaha to LA. Now it remains to be seen whether Ajit Jain is going to come from the New York City area, and whether Greg Abel is going to come from Des Moines. Probably some of those guys, if not all of them, will go. So that's number one.

Number two, it is going to be virtual again. And of course, Brian, you know the only place you can see it is on Yahoo Finance.

BRIAN SOZZI: I'm ready.

ANDY SERWER: We're delighted to be live-streaming it again as well, yeah.

BRIAN SOZZI: Yeah, pysched for that one, Andy.

MYLES UDLAND: Andy, we were talking to-- Andy we were talking to Whitney earlier, Whitney Tilson, and he mentioned the buybacks, which I know he's been he's been advocating for a long time. And I do kind of wonder. You know, we've spoken so many times over the years, what would Buffett do with the cash. And we played this fun fantasy football game of what business he should buy, and how much money they had, and all of these certain things. But it's interesting that he-- not only did he start repurchasing a lot of stock with that cash. But he specifically called out the error he made in the Precision Castparts investment, or that purchase, which was the last real major purchase that we saw from Berkshire. And I do wonder, as you see it and I've been thinking about this myself. Will there be no more major Berkshire purchases so far as the company exists?

ANDY SERWER: I mean that's a great question, Myles. And it sort of speaks to well, Warren Buffett is just the same as he's ever been, and he can just continue doing this, the fact that he's 90 years old notwithstanding. Leaving aside the age issue, the tyranny of large numbers is a real change for Berkshire Hathaway and for Berkshire shareholders. In other words, it gets harder and harder to do as well, specifically when it comes to acquisitions. I mean, there's just not so many things out there that are big enough that fit the bill, that have a willing seller and not asking too much, with a management that's going to stay in place, et cetera, et cetera; for Berkshire to buy. And so the buybacks become a good alternative, particularly when he sees the valuation that's there.

But I think you're right. I mean, you know, there is a possibility that we're not going to see a big thing. I mean what is he going to buy, Costco, Apple? I mean, these things sort of stretch your brain. I guess they're always possible. But you know, also remember that he talked about Munger saying it's really important, we've learned over time that having a stake in these businesses rather than just owning the whole thing, actually is kind of a smarter way to go. So it could well be, Myles, that you're right. The era, the age of the giant swallowing one giant company like that is over for Berkshire.

BRIAN SOZZI: Andy, you've follow Buffett for-- for a very long time. Are you a little-- a little surprised that he didn't say much more about COVID, or the trading activity frenzy, or stimulus in the letter?

ANDY SERWER: Yeah, I'm-- I'm really surprised. I mean I in my mind had all kinds of things that he was going to talk about. Succession, you didn't even mention that, Brian. That's, of course, always there. I went back and looked, by the way. I wrote an article about him 19 years ago when he was 70-ish, and pressed him really hard on succession. Can you imagine? I mean, you know, so he's been facing these questions for a long time. Munger made a note, I think it was in 2018, that he thinks that Buffett's good for another seven or eight years. So that would probably put it to 2025 for that particular issue.

No doubt Buffett is going to be asked a lot of questions at the annual meeting about the meme stocks, about crypto, about SPACs, about Black Lives Matter, about Trump, about the economy, and the pandemic, and the recovery. But, you know, it was a little surprising that he didn't even say, I'm not going to talk about all these myriad issues facing the markets and society. No doubt you'll be asking me those questions at the annual meeting. I'm not going to take up ink here, because I could just go on forever. I mean instead he did sort of a nice tour of America, looking at it through the eyes, if you will, of the Berkshire portfolio companies, which was great. I mean, quite honestly, I thought there was less news in this letter than there were in many, many years, previous letters that were much more newsworthy, I should say, than this one, quite honestly.

JULIE HYMAN: Andy Serwer, thank you so much. Really appreciate it, interesting chat there and dig into Warren Buffett, appreciate it.