What Buffett Would Do Now
Returning from Omaha
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Hi Partner 👋
It’s currently 3 AM local time.
I’m writing this email somewhere above the Atlantic Ocean.
While everyone is sleeping on this flight, I am writing this email to you.
You. A Partner. An invaluable reader.
And I must tell you: I absolutely can’t sleep.
I am way too excited as I’m just returning from the Berkshire AGM.
This was the fourth time I attended the AGM and it might be the best edition ever.
It’s ridiculous how much intelligence is gathering at one place during the Berkshire Weekend.
I returned with:
Plenty of new ideas
Massive motivation to generate even more value for you
7 new investing books
There are three very important points I took away from this meeting:
1. Berkshire Hathaway will continue to outperform
Why?
They can use the float from their insurance operations to invest.
Just imagine, purely hypothetically, that Berkshire Hathaway were to completely mirror the index…
In that case they would still outperform the index itself simply because of that float.
This will remain the case in the coming years.
2. Berkshire Hathaway > S&P 500
Since Greg Abel took over as CEO, Berkshire has underperformed the index by 40% over the past year.
The last time this happened? 1999.
If you’re a passive investor, you’re better off treating Berkshire like an index.
Compare it to the S&P 500 and the case is clear.
Berkshire is cheaper, you get better diversification, and you’re sitting on a massive cash pile.
3. The magic of the long term
What if you had bought Berkshire Hathaway in 1962 for $10,000?
S&P 500: 6 million euros
Berkshire Hathaway: 3.6 billion euros
That means you could take away 99% of Berkshire’s return and you would still have outperformed the index.
General takeaway
One thing that keeps crossing my mind while I’m writing this?
Warren Buffett said that anyone who says size doesn’t hurt performance is selling.
The larger you are, the harder it becomes to grow very attractively.
That makes complete sense.
It’s way easier for a young company with $2 million in revenue to triple in size than a company such as Apple (Berkshire is trimming down it’s position in Apple by the way).
If Apple would need to triple in size, everyone in the world should need to own 2 iPhones.
You can also see this in the returns of Berkshire Hathaway.
The larger they got, the more their yearly outperformance declined:
As an individual investor you can invest in small companies.
Companies that are impossible for Berkshire Hathaway to invest in.
As a matter of fact, it’s what Warren Buffett would do if he would start all over again:
“I would have no problem to generate a return of 50% per year if I would just have $1 million to invest.”
That’s exactly what we are trying to do with Tiny Titans.
I truly believe today are exceptional times for small-cap quality investors.
There are two main reasons for this:
Quality stocks are facing an irrational selloff
Small-cap quality stocks outperform the market by 4-5% per year on average
In Omaha, I was in a panel discussion together with Brett Kelly (CEO Kelly Partners Group.
Brett is special. Very special.
We talked for about 30 minutes about the quality investing philosophy and how this applies to Kelly Partners Group.
To be honest I’m not always sure what to think about him.
But the fundamentals of Kelly Partners Group?
They look absolutely amazing.
The company is doubling in size every 3 years.
The company wants to grow its NPATA from $9 million in 2025 to $40 million in 2031.
If Brett would only achieve half of this very ambitious target, the stock looks cheap today.
It’s a company that could 10x from here if they keep executing their flywheel.
But it’s also a company with quite some risks involved.
Those are the kind of opportunities that could change lives if the thesis are correct.
And you know what?
I think I might have another opportunity in Japan that could change your life.
It’s a company that was tipped to me by a hedge fund manager based in New York.
I’m doing my research as we speak.
Partners of Tiny Titans will receive all the details shortly.
Next week, I will give you some insights about how to find 100-baggers.
Stay tuned!
Everything In Life Compounds
Pieter
P.S. Discover here whether Tiny Titans is something for you.
P.P.S. Are you already sure that you will join? Leave your email here and receive the invitation on the 9th of June, one hour in advance (spots will be limited).