Page 22 - Investment Advisor June 2021

PORTFOLIO PERSPECTIVES

By Jane Wollman Rusoff

Buffett’s Investments: The ‘Great,’ the

‘Good’ and the ‘Gruesome’

Berkshire Hathaway chronicler Adam Mead discusses Buffett’s worst

investment and the future of the conglomerate.

elling Apple stock — $7.4 billion
worth — last year was “prob-
Sably a mistake,” Warren Buffett
said at the Berkshire Hathaway annu-
al shareholders meeting on May 1,
which, like last year’s, was a virtual
affair, only this time from Los Angeles.
With him were partner and vice chair-
man Charlie Munger and vice chair-
men Greg Abel and Ajit Jain. In an
CNBC interview a couple days later
Buffett, 90, revealed that Abel, 59, who
heads Berkshire’s non-insurance busi-
ness, will be his successor.
The 50-plus-year-old conglomerate
has only in the last few years begun to
focus on investing in high tech. Apple Analysis of Warren Buffett and Charlie tal, such as those in Berkshire’s utilities
occupies 44% of the portfolio. Buffett Munger’s Conglomerate Masterpiece” sector. They have predictable, regu-
also owns shares of Amazon — whose explores Berkshire’s development year lated returns; and as they add money
stock he began buying in 2019 — and by year, with Mead digging deep into the to the business, there’s a return on
cloud computing company Snowflake, in firm’s growth from “a dying textile com- that additional capital. The “gruesome”
which Berkshire invested $735 million pany” to the enviable success it is today. ones are, for instance, Dexter Shoe Co.
last September. A former commercial loan officer, and what had been Berkshire’s dying
Although Buffett wouldn’t speak to Mead writes a monthly newsletter, textile business. Dexter was almost like
cryptocurrencies, Bitcoin, specifically, Watchlistinvesting.com. He mentioned a shadow of that — production was in
Munger, 97, had no hesitation, answer- that after sending Buffett a copy of his America and not as competitive with
ing bluntly: “ …The whole damn devel- book, he received a thank-you note, now overseas manufacturing.
opment is disgusting and contrary to the framed, with “really good praise.” Here
interests of civilization,” he said. are highlights of our interview: Do those three classifications
Which shows Buffett hasn’t aban- ever change?
doned his traditional strategy of owning Investment Advisor: In his 2007 No. One company that went through
lower-tech companies, as Adam Mead, shareholders letter, Chairman Warren all three was The Buffalo News. It was
CEO and chief investment officer of Buffett described Berkshire Hathaway’s a “great” company; but as the years
Mead Capital Management, who just businesses as “good,” “great” and went by, competitive dynamics of the
released a 766-page book on Berkshire, “gruesome.” Please explain. newspaper business changed, and it
points out in an interview. In our con- Adam Mead: He said that a “great” became a “good” company, which ended
versation, he discusses Buffett’s own business earns good returns on capi- up a “gruesome” business. Last year Christopher Goodney/Bloomberg
labels for the Berkshire companies: tal and can grow; for example, See’s Berkshire sold all their newspaper busi-
“great,” “good” and “gruesome.” Candies — though it doesn’t grow as nesses because the industry had been
“The Complete Financial History of much as some others. A “good” busi- decimated by competition, especially
Berkshire Hathaway: A Chronological ness might earn a good return on capi- the internet.

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