U.S. Markets closed
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Yahoo Finance Berkshire Hathaway pre-show: Whitney Tilson

  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.
  • Oops!
    Something went wrong.
    Please try again later.

Yahoo Finance Editor-in-chief Andy Serwer, along with others from Yahoo Finance and guest Whitney Tilson, discuss what to expect during Berkshire Hathaway's first-ever virtual shareholder meeting for 2020.

Video Transcript

ANDY SERWER: Joining us is Whitney Tilson, Empire Financial Research founder and CEO. Whitney, great to see you. I know it's got to be killing you that you're not here, but you're not alone. 40,000 other people feel the same way. They're not here.

So I got to ask you. You know, you love to ask a question. But what are you looking for the most here from Warren Buffett this afternoon?

WHITNEY TILSON: You know, look. The thing that really jumped out at me in their Q1 earnings is the complete lack of buying back their own stock. Like I understand Charlie Munger said, our phone wasn't ringing and the government's providing a lot of cheap capital. So that's bad for Berkshire doing deals.

But let me just read you four sentences from Buffett's annual letter exactly three years ago, and let's contrast that to what they have actually been doing in the last quarter. He wrote, Charlie and I have no magic plan to add earnings except to dream big and to be prepared mentally and financially to act fast when opportunities present themselves. Every decade or so, dark clouds will fill the skies and they will briefly rain gold. And when downpours of that sort occur, it's imperative that we rush outdoors carrying wash tubs, not teaspoons. And that we will do.

Well, in the first quarter, they weren't carrying teaspoons. They were carrying thimbles. Their share repurchases ceased. If you look to page 42 on the 10Q, on March 10 they didn't buy back a single share after March 10. And over the next two weeks, more than 60 billion of Berkshire Hathaway stock traded. And they didn't buy a single share as the stock crashed to as low as $239,000 per a share.

So clearly, they don't think it was raining gold. They, instead, pulled in their horns, hoarded cash, and, I guess, waited for it to really rain gold. I think what they were saying in their behavior, in what they actually did with not buying in, not doing any big deals, and not even buying in really any material amount of their own stock is they were saying, we think things are going to get a lot worse yet.

JULIA LA ROCHE: Hey, Whitney. It's Julia La Roche. Thank you so much for joining us, and thanks for that analysis there on the buybacks. I suppose it would be one question you would have. And as someone who has been going to the meeting for 22 years-- I know this year, obviously, not the case-- you're someone who's known to ask questions. So I guess looking beyond the share buybacks, what else would you want to ask Warren Buffett or Greg Abel today?

WHITNEY TILSON: You know, they sold another 6 billion worth of stocks in April as the markets rallied. So there's a sort of another bearish indicator that they're not only not buying back their own stocks. They're selling down at least some. I mean, that's only 3% or so of their equity portfolio.

But I'd want to know, you know, is your-- what I'm seeing in the numbers is a very bearish outlook. But when I see you interviewed, you say the usual stuff about being, you know, long-term bullish on America. Well, how do you reconcile those two things?

- Hey, Whitney. It's Myles here. Good to talk to you in this format. I'm just curious, maybe moving slightly away from Berkshire here, of your view on the market and how you've played the last six weeks. You were very vocal in March about where you thought things were headed, and you're kind of reading through the Buffett commentary in the last couple weeks and implying that he might think things get worse from here. I get the sense that you believe maybe we turned that corner in late March, at least from a market perspective. Where are you at right now?

Yeah. Well, look, I was a little early in starting to get bullish. But, you know, within an hour of when the market bottomed on March 32, I was pounding the table doing a two-hour webinar saying, this is the best buying opportunity since the Great Financial Crisis. And that turned out to be a pretty good call. The market has had an unprecedentedly rapid and strong rally since then.

So I was sort of hoping to see that Buffett and Munger were seeing the same thing I was. It was raining gold, at least for about two weeks in there. And clearly, they were not seeing it. And maybe it's because they're smarter than I am, that this is a bear market bounce and that we're going to go back and the market's going to be down a lot further than it was on March 23. So that's one possibility.

Another possibility is is that they're managing 100% of not only their net worth but a lot of retirees and so forth. So they're naturally in a position to be a lot more conservative than I am, and I understand that. That's why I think Berkshire Hathaway remains the number one retirement stock in America.

ANDY SERWER: Really, that's-- just a follow-up on that question just quickly, Whitney, because we're running out of time. But I just wanted to ask you, you know, this is really a buy-and-hold stock for the next 20 years, you think?

WHITNEY TILSON: Look. I think you have to have appropriate expectations. From here, my calculation, my conservative calculation of intrinsic value right now is $374,000 in a share and the stock's at 274. It's at a 27% discount to its intrinsic value. Now, that's not an all-time high discount. Back in '08, early '09, it got to almost half of intrinsic value. So that was really an incredible buying opportunity.

But today, I think it's safe. It's cheap. There's decent growth. But you just have to understand that these old guys are just super conservative. And if you're looking for excitement, if you're looking to double your money quickly, this is not for you. If you're looking for a stock that's down 19% this year in a down-12% market, meaning the discount to intrinsic value has widened-- because Berkshire Hathaway's intrinsic value is not down 19%. Their stock is down more than its intrinsic value, which makes it a better buy today.

ANDY SERWER: OK. Whitney, thank you so much for that.