Warren Buffet: The Future Is Bright for This Incredible Business

Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. 

For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts. Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  )   but it's not the only topic they discuss. This year, Buffett and Munger discussed Geico's future in response to a question from financial analyst Jay Gelb. 

I attended the meeting back in May and the following are my notes on Gelb's question, along with responses from Buffett and Munger.

Jay Gelb: Geico continues to gain share while having attractive margins, spending more on advertising, and having lowest cost structure. Will Geico overtake State Farm in market share?

Warren: No one knows for sure. We passed Allstate (NYSE: ALL  ) this year. It has one of the great company histories in America. Started by a farmer with no insurance experience. He built this incredible business based on a better business model, this was 1920, and then Geico came up with an even better model. State Farm was huge by that time, Allstate was very large. It's taken us since 1936 to become No. 2. If I live to 100, we should be No. 1... I'm going to do my part! (laughs).

We will gain share, in my view. Month after month, year after year, as long as we never forget our job is to take care of the customer, and keep rating risk well. Tony Nicely has done a job that belongs in the hall of fame in terms of achieving that objective. In the 15 years prior to Tony taking over, market share had hovered around 2%. Since then, it's gone to 10%-plus and it'll keep going. State Farm has a net worth of probably $60 billion to $70 billion, and a strong presence in homeowners, a strong agency force, and a lot of satisfied customers. It won't come fast, but I do think it'll come.

Charlie: Geico to me is very much like Costco (NASDAQ: COST  ) , one of the reasons that they succeed is because they're really committed to offering a really great product. A lot of people talk that game, but few live it. Geico does and that will help it over time.

Warren: One thing you'll find. People [employees] don't come and go from there. We have no one who leaves us. They have their own idea about what should be done, and how it should be done right.

Charlie: Costco is unbelievable and it reminds me of [inaudible]. Talking the game is one thing, but living the game is something else. It's against human nature to offer prices like that. It's like wearing the ultimate hair shirt, yet it works.

Warren Buffett just bought nearly 9 million shares of this company
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report details this company that already has over 50% market share. Just click HERE to discover more about this industry-leading stock... and join Buffett in his quest for a veritable landslide of profits!

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2952561, ~/Articles/ArticleHandler.aspx, 8/29/2015 4:59:32 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Brendan Mathews

A Fool since 2005, Brendan is a research analyst on The Motley Fool's Stock Advisor newsletter. He enjoys scouring financial statements, pontificating on competitive advantage, and any outdoor activity.

Today's Market

updated 19 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
BRK-A $205344.00 Up +404.00 +0.20%
Berkshire Hathaway… CAPS Rating: ****
BRK-B $135.74 Down -0.49 -0.36%
Berkshire Hathaway CAPS Rating: *****
COST $139.95 Down -0.26 -0.19%
Costco Wholesale CAPS Rating: *****