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Berkshire Hathaway Inc. (BRK.A), Goldman Sachs Group, Inc. (GS): Five Key Takeaways From the Woodstock for Capitalists

It’s unlikely that you will ever hear this spoken: “I bought shares of this stock just so I could go to the annual meeting.” Unlikely, that is, unless you’re talking about Berkshire Hathaway Inc. (NYSE:BRK.A), the giant conglomerate run by Warren Buffett.

Once a year, shareholders flock by the thousands to Berkshire’s Omaha home base. This year, as my taxi drive informed me, there were nearly 50,000 visitors expected for the weekend to hear Buffett and Berkshire Hathaway Inc. (NYSE:BRK.A) Vice-Chairman Charlie Munger speak on Berkshire, investing, life, and whatever else happens to come up.

And speak they did. After a short video — which included an animated Buffett and Munger dancing to “Gangnam Style” and Bryan Cranston getting bullied by Buffett over peanut brittle — the duo spent the next six or so hours responding to questions from media, shareholders, analysts, and even a Berkshire bear.

Below are five key highlights from the meeting that you shouldn’t miss.

1. Back to the basics.
If there’s magic to Buffett and Munger, it may be that there’s no magic to Buffett and Munger. While there’s a lot that goes into the outsized success that the two have seen over the years, much of it may come from their stubborn adherence to the tried-and-true basics.

Here’s a sampling of some great reminders from this year’s meeting:

“[We’re] not looking at the aspects of the stock, we’re looking at the aspects of the business… we always look at them as businesses whether we’re buying the whole thing or 100 shares.”

“There some parts of the game that we don’t understand so we don’t play with them.”

(On feeling comfortable lending to Harley-Davidson, Inc. (NYSE:HOG) during the financial crisis and the importance of customer loyalty): “Any company that gets its customers to tattoo ads on its chest can’t be all bad.”

“We’ve always tried to stay sane when other people go crazy.”

“If [investors] try to time their purchases they will do very well for their broker and not very well for themselves.”

2. Too big to succeed? Or big enough to dominate?
Some Berkshire Hathaway Inc. (NYSE:BRK.A) shareholders worry that the company is getting too big to deliver attractive returns. While there’s merit to that concern, one theme in this year’s meeting was the competitive advantage that Berkshire’s size offers the company.

Buffett quipped that “Berkshire is the 800 number when there’s panic in the markets and for one reason or another people need extra capital.” That was the case for Goldman Sachs Group, Inc. (NYSE:GS), General Electric Company (NYSE:GE), and Bank of America Corp (NYSE:BAC), all of which turned to Buffett during or following the financial crisis in search of the one-two combo of cash and the Berkshire Hathaway Inc. (NYSE:BRK.A) stamp of approval.

For its part in these transactions, Berkshire Hathaway Inc. (NYSE:BRK.A) received extraordinary deals that “normal” investors couldn’t dream of getting. In Goldman Sachs Group, Inc. (NYSE:GS)’s case, Berkshire received preferred stock shares paying a monster 10% dividend and warrants to buy $5 billion of the stock at $115 per share. It was similar for Bank of America, with Berkshire walking away with preferred shares yielding 6% and a truckload of warrants.

There are few, if any, other companies out there that have the capital and reputation to score these kinds of deals. As Munger put it, Buffett has “found a place where there’s less competition.” And that’s a good place to be.

3. Berkshire’s next big opportunity.
Berkshire made waves in the insurance industry late last month when it announced that it’d hired four top executives from AIG . The execs will become part of Berkshire’s commercial insurance business — a business that Berkshire Hathaway Inc. (NYSE:BRK.A) is focused on growing significantly.

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