When we travelled to Omaha this weekend, we had a key question we wanted answered: What do Berkshire Hathaway's (NYSE:BRK.B)(NYSE:BRK.A) investors – the owners of his company, and arguably his employers -- think of Warren Buffett as a manager?
We got our answer quickly: They think he's fantastic.
Perhaps unsurprisingly for owners of a stock that returned almost 21% annually from 1965 to 2016, every Berkshire shareholder we spoke with had good things to say about Warren Buffett. They're happy with him running the business -- in fact, not a single person graded him below A-.
But a grade can only tell you so much. We asked shareholders for the full story.
Here were our main takeaways.
Warren Buffett has focused on building a reputation for honesty and trustworthiness. In fact, during his 1991 testimony before the U.S. House of Representatives' Subcommittee on Telecommunications and Finance, he famously made this public statement to employees: "Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless."
And Berkshire shareholders certainly feel that he's succeeded. As Teri U. from Omaha said, "There are so many people that you don't trust – he just seems like somebody you can trust. That's why I feel good about him."
Buffett has driven tremendous returns since 1965 – 20.8% compound annual share-price growth, to be precise, as of the end of 2016. More impressively, he's also driven 19% compound annual book value growth over the same time period. For a company to achieve that kind of meteoric long-term growth –while buying and operating 'old-fashioned' businesses like GEICO insurance, See's Candies, BNSF railroad, and Fruit of the Loom – is simply incredible.
And shareholders have taken notice. As Adrian P. from San Francisco opined, "I don't think there's any better manager in terms of deploying capital."
This is a key point, since Berkshire has been such an acquisitive company over the years. It has achieved these results without the large corporate staff that's standard across the Fortune 500. When doing their due diligence on a potential acquisition, Buffett and vice-chairman Charlie Munger focus on two things: Big-picture business quality and management.
Munger summed this up in response to a question at last year's shareholder meeting: "When you start to think about it, business quality usually counts on something more than whether you crossed the T in some old lease or something, and the human quality of the management who are going to stay is very important. And how are you going to check that by due diligence, you know?"
When you're focusing on what matters (and have the judgment to pick correctly), you can make the right decisions without a big staff. That saves shareholders money on staffing – and makes them a lot more in great acquisitions.
He's looking out for the little guy
The final thing shareholders we spoke with flagged about Buffett was his support of regular folks. We see this time and again in both Buffett's words and actions.
Unlike just about every other publicly traded company, Berkshire Hathaway doesn't hold regular analyst calls. We don't need to guess at the reason, as Buffett once said that "I'm not interested in what analysts think about Berkshire; I'm interested in what the owners think about Berkshire."
Additionally, Buffett's annual letter to shareholders provides lots of insight for average investors – on the stock market, the economy, and life. While it's common for CEOs to write annual letters extolling the virtues of their businesses and celebrating successes over the past year, it's impossible to find an annual letter with more information useful for the common investor than Warren Buffett's.
And there's one other important way that Buffett looks out for everyday investors: Shareholder Herbie F. from Holdrege, NE specifically called out the "different shares he has in the market" – a reference to Berkshire's two share classes (A and B). The A shares are unaffordable for regular folks, as they currently trade for a cool $250,000. At less than $170 per share, the B shares are much more accessible – reflecting yet again Buffett's commitment to help the masses invest effectively.
The proof is in the pudding
At the end of the day, people invest to make money – so the big test of a manager is whether he or she guides a company that helps investors achieve that end. Long-term winning stocks usually represent money-making businesses with sustainable advantages. Given Berkshire's incredible growth in intrinsic value (and share price) over the years, it's clear that Warren Buffett passes that test with flying colors.