Abstract: "Would you like to sell Tesla in a deep profit and capital-chain dispute?" asked an on-site shareholder to ask Buffett. Buffett bluntly said, "Muske does not need my help."
The annual Berkshire Hathaway “Shuanghe†shareholders’ meeting completed another year of pilgrimage in the eyes of a peaceful and lively global capitalist.
Or is that "recipe" - a funny child Warren Buffett is responsible for laughing and life, holding a child Mengge responsible for language surprising. The titan media's significant difference at the 2018 shareholders' meeting was that Omaha, a small town in Nebraska, gradually became the show ground for Sino-American capital competition and wind direction judgment. With regard to the thinking of the capital power of the two countries’ heads, the power of mobility is shown here.
At the 2016 shareholders meeting, no Chinese asked questions. There were sporadic Chinese voices in 2017. This year, five Chinese asked questions and six times discussed issues related to China. The contents involved trade warfare, investment allocation principles, artificial intelligence, public charity, and investment in China. Let China's investors come out of the limelight of bathing stocks. So that during the last few consecutive Chinese questioning sessions, the huge stadium began to resound with surprise sighs.
Munger's "preference"
In the face of the huge and highly-focused Chinese market, Berkshire’s largest investment in China is still BYD.
Therefore, BYD is always cited as an example when the on-site U.S. news peers are looking at the potential of the Chinese market, which to some extent represents Buffett's and Munger's judgments on the Chinese targets and wind direction assessment.
Stella Lee is the senior vice president of BYD Co., Ltd. and the president of BYD North America Branch. As an old acquaintance and important Portfolio of Berkshire, Stella is also a frequent visitor at the shareholders' meeting.
"Charlie (Manger) seems to have a special preference for us." Stella told the titanium media. Each year, Stella and her colleagues at BYD hold a regular dinner with Charlie Munger at their home to exchange information about BYD's latest business and views on the industry and market prospects. Both Buffett and Munger did not interfere with the business process and results of BYD and always maintained their confidence in the prospects.
In the field of new energy vehicles, BYD considers Tesla to be the object of the bid. Even on a certain occasion last year, Musk expressed his disdain for this "potential competitor" from China. Buffett has many resources and contacts in the field of new energy travel in the United States. However, he has not been significantly involved in the business of Musk, but he has put his perspective on the Chinese competition BYD of Musk.
Similar energy solution company business, vertical battery product sequence in the same box, and new energy automobile market in the same battlefield. BYD and Tesla reflect to a certain degree the status quo of the development of new energy vehicles in China and the United States in terms of products and technologies. In the face of temporarily different national target markets, the two companies have a high degree of similarity and clear distinctions. In this distinction, the BYD in which Buffett's final investment judgment falls is created. Of course, China's market prospects and policy support are only one part of the criteria for judgments, but they do not constitute an overwhelming influence.
BYD or Tesla?
At this year’s Berkshire Hathaway shareholders’ meeting, shareholders recounted the negation of the traditional commercial moat theory that Musk (the founder of Tesla) mentioned at the earnings conference call. “The moat concept is very stupid.†, And asked Buffett whether to agree with this statement.
Buffett responded by saying:
The rapid advancement of science and technology has indeed accelerated the destruction of “moat†in some industries in recent years, but I don’t think technology has destroyed the “moat†of every industry.
Buffett said at the same time, "Companies should improve their moats and defend their moats at all times. Musk may cause subversion in some industries, but I don't think he will compete with us in terms of candy."
Munger also added, "Warren Buffett never considered creating an actual moat, even if they are very sophisticated."
"Is there any willingness to sell Tesla in the midst of deep profitability and funding chain disputes?" an on-site shareholder asked Buffett. Buffett bluntly said, "Muske does not need my help."
Companies without scale profitability, steady consumer expectations and positive free cash flow have never been the subject of Buffett's favorite.
In 2018, BYD ranked among the top 15 in the world in Berkshire Hathaway’s latest ranking of companies surveyed. This year they squeezed out the famous IT and computer hardware giant IBM.
The screening criteria for the Top 15 list are based on Berkshire's current phase statistics on project investment returns and the project's long-term value assessment. Under the different value definitions of the target company, different valuation models will occur. It is just like the Tesla, which has attracted worldwide attention, has limited value in this model, and IBM has a narrow space under this model.
How to define BYD has become an important logical link for Buffett to consider investment decisions.
According to BYD's 2017 financial report, its annual turnover was 102.6 billion yuan, and its net profit attributable to listed companies was 4.066 billion yuan. Of which, the income from automobiles and related businesses was 56.624 billion yuan, accounting for 53.46% of the total revenue. Power battery, foundry business, and cloud tracks also play a traditional advantage in revenue support in the other half of the income stream.
This has never been an orthodox new energy auto company. The existing large and stable supply channels and lines of business at the B-side have allowed BYD to never be in a dilemma in cash and profit.
This is not a typical battery energy solution and consumer hardware foundry. BYD has won the industry's front-end brand recognition and market share in new energy commercial vehicles, passenger and cloud rails and other energy applications.
In terms of endogenous and derivative power, the sense of space for BYD's development is based on a consistent and reliable supply of market demand, which in turn is built on the potential dividends of policies and incremental markets.
Therefore, good operating cash flow and sustainable profit structure have created a very solid foundation for BYD's design, R&D, and manufacturing of consumer products in the future. Taking this as an opportunity, when combining the concepts of smart and technology upgrades, whether BYD or other new energy terminal products, BYD's derivatives and diversification will be easy to handle, and there are enough food and grass. This is in line with Buffett's basic value investment outlook.
This is why, on one of the days in 2011, Munger walked to Buffett and took a brief introduction from China's strange company BYD and said two words, "Buyit."
Buffett's definition
Buying Apple in the secondary market at a large scale has caused the market to be puzzled by Buffett’s principle of investment in science and technology. Berkshire didn't choose Apple in the early days because it was a technology stock. Those who do not understand the industry will not vote, and technology stocks have always been the focus of Buffett's cautiousness. Even if faced with the Google by Bill Gates endorsement of the same year, can not completely lure Buffett into the desire to become one of Berkshire's biggest regret. However, insisting on the principle of investment still does not allow Buffett to regret it. Even today, Berkshire's layout in the technology industry has been controlled by a young and talented small team and reported to Buffett and Munger for final review.
In Buffett’s eyes, Apple’s definition was never a smart consumer terminal hardware company or a technology company. In this regard, the recent millet company is a concrete reference. In the listing application, Lei Jun’s self-positioning also tried to upgrade Xiaomi from an intelligent hardware company, such as a mobile phone with a wide range of C-recognitions, to an ecological platform company in the era of IOT. Therefore, this imagination received a clear return on market valuation. Intelligent hardware and technology ecology company, the former's endogenous power and profitability is difficult to obtain long-term guarantee, the latter even if the hardware and software ecology in the expected growth in payment, positioning a huge growth profit margins. None of this is Buffett's mind. In his eyes, Apple is a consumer product company.
When Buffett decided on the value of Apple's assets and cash liquidity, he resolutely entered the game. Not because the decision to open IPhone is not to invest, but consumer spending behavior created Buffett's interest in Apple. Buffett is an old fritter to have a deep understanding of the nature of business. From the time of World War II, the investment engine encountered a new investment in the era of smart Internet, and the value pattern in his eyes was consistent. Do not care about the concept and technology of cosmetic packaging, do not care about subversion of the new model, the value of the demand itself and the business itself to see the potential, this is Warren Buffett to ensure that in any era are not anxious principle of pressure on the stone. It also gave him sufficient confidence that when the entire society was coerced by the desire of science and technology, he always insisted on the plain mantra: "I don't understand science and technology, and I don't vote if I don't understand." From the perspective of the history of the past, these old urchins do not understand and understand too much.
"China is too complicated, only capital concentration can be efficient."
In the five Chinese who asked questions at the general meeting, Xu Yang, a partner in the asset management business of Tiger Securities, asked Buffett questions on the principle of first-priority investment allocation. According to the configuration perspective, in terms of GDP and economic development stages, both US and US investors should increase the proportion of investment in China, but in reality most Americans do not do so. Munger also acknowledged that this phenomenon is ubiquitous.
In Xu Yang's view, the global market configuration sounds good, but it is really difficult to do. First, Berkshire's shareholders are all Americans, expecting returns. If they overinvest or invest in China entirely in proportion to GDP, they will cause large amounts of capital to flow into China. Even if the potential growth is expected to be high, in the event of wrong investment options, poor performance, or long sideways, Buffett and Munger will be difficult to explain to investors, and outside questions will quickly build up. China's market characteristics are difficult to understand for ordinary American investors. Even if such investment giants as Buffett and Munger, it is difficult to make big strides into the Chinese market. Those who have no experience, it is even more difficult to make this decision.
Reflecting on this issue, Buffett showed very pragmatic in his answer to Xu Yang’s question. “Today many investors in the United States have missed China’s opportunities. Investment in China looks too complicated and difficult. In fact, we have in China. Investing, and doing well, but you have to invest a lot of money in a certain place, such as a scale of more than one billion US dollars, in order to produce economic efficiency."
Refined value investing, Warren Buffett's cautious accompanied with greed after judgment, this point has never changed.
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