Warren Buffet: The Future Is Bright for This Incredible Business

Buffett predicts further market share gains for Berkshire's auto-insurer while Munger compares the company to Costco

Jun 29, 2014 at 10:25AM


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.

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Brendan Mathews owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway and Costco Wholesale. The Motley Fool owns shares of Berkshire Hathaway and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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