Omaha Trip Report

The Berkshire Hathaway weekend is a lot of fun, its great to hang out with friends and talk and learn together. Every year there is something new. This year, I completed what I call the Omaha Triathlon part 1 - Berkshire Hathaway meeting, part 2- the 5k run, part 3- the Markel meeting.

When I first started going to the meeting some years ago, I assumed that I would come back with all these investing ideas and stocks to buy. Well, it does not really work that way. There are a great many takeaways, but they are more philosophical and reinforcing concepts with new examples rather than - "hey I think I should buy some more US Bank."

Some of my notes:

• Buffett really enjoys working with 3G (Heinz), would not be surprised to see more collaborations. 3G is way more active than Berkshire and Heinz could be a model for more deals with 3G and Berkshire partnering up front while things are rationalized and Berkshire providing the long term home for the company. It seems like a good fit for both companies' strengths

• Munger: "We're way better off without adding to the culture of envy in America. I would say that envy is doing the country a lot of harm."

• Buffett said that See's has been a great investment on its own, but its larger impact on Berkshire was to orient towards quality. Specifically, he said they probably would not have bought Coke (~15 years later), one of their all time most successful purchases, if they had not learned the value of paying up for quality with See's. Munger chimes in: "If there's any secret to Berkshire, it's that we're pretty good at ignorance removal and the good thing about it is that we have a lot of ignorance left," 

• Buffett: "Berkshire is about growing earning power"

• Munger: "If you're not confused, you probably don't understand it very well."

• Munger commented that a key to his success was when he realized he would not be a professor at Caltech, and that instead he needed to "compete with idiots and that luckily there is a huge supply."

I mentioned that I do not really come back from Omaha with a set of specific ideas for investing candidates, well there is one exception. The Markel meeting is a treat. What they are doing is so simple - taking the Berkshire playbook and running it.  At the Markel Q and A, one shareholder asked Tom Gayner "Why don't more people do this?" Gayner replied: "Shhhhhhh."

Gayner said the Alterra acquisition is for all practical purposes 99% done. This transaction significantly increases Markel's float. The Alterra portfolio was primarily in bonds like most insurers, so moving this to a more Markel-like allocation is a great opportunity. 

Like Buffett, Gayner looks for clean balance sheets, or "prudent use of debt" in his words. Gayner quoted Shelby Davis as saying "if you want to avoid doing business with crooks, avoid companies with debt."

A question came up on the insurance side as to other insurers that the Markel folks admire, they said they like smart competitors, because they make for a rational pricing environment. Steve Markel specifically mentioned Progressive which has managed to keep its combined ratio in the low 90s, a remarkable feat.

The third leg of the stool after insurance and investments is wholly owned business, Markel Ventures. Gayner said there is nothing to report and did not sound too encouraged about near term prospects for adding to the stable of companies here in the near term. Too much private equity competition. They do better at buying when conditions are bad.

Last year Gayner recommended a terrific book Genghis Khan and the Making of the Modern World. No book recommendation this year though.

Overall, I continue to be impressed by the steady progress and consistent approach at Markel.