ASAM Omaha Trip
By Matt Gregory - ASAM Student Portfolio Manager 2005

Every May, thousands of shareholders of Berkshire Hathaway trek to Omaha, Nebraska, file into a 17,000 seat arena and listen to the world’s second richest man opine on a variety of subjects related to investing and life. On Friday, October 7, 22 Anderson students had the unique privilege to interact with Warren Buffett in a much smaller venue, asking their own questions to the “Oracle of Omaha” both in a 90 minute Q&A session and over lunch at his favorite steakhouse, Gorat’s.

Coordinated by Anderson Student Asset Management, Anderson’s quantitative investment fund, the trip included students from ASAM and SIF as well as other second years interested in investing. In addition to the time with Buffett, the group visited two Berkshire Hathaway operating subsidiaries in Omaha, Nebraska Furniture Mart and luxury goods retailer Borsheim’s. They toured each retailer’s store and met senior management to hear about what it takes to run a company for a hands-off – yet extremely astute – boss like Warren Buffett.

The highlight of the trip was the hour and a half spent with Buffett in a meeting room in the same building as Berkshire Hathaway’s headquarters. The meeting had essentially no structure: Buffett suddenly popped out of a side door by himself, said hello and made sure everyone had helped themselves to a complimentary Coca-Cola product from the back of the room (or at least popped open the can), and then started to answer questions. Students from USC Marshall School of Business were at the Q&A as well, so Anderson and Marshall took turns posing questions.

Standing for the entire 90 minutes – not bad for a 75 year old! – Buffett spoke on topics ranging from the credit markets (spreads are too tight) to career advice (work for someone you admire the most, and don’t worry too much about the money). He said that his biggest worries for the U.S. going forward was nuclear catastrophe and our current account deficit, which he likened to selling off a very small piece of a very large and rich farm every day. Buffett also noted that the inevitable market dislocations that would result might provide some attractive opportunities for nimble investors. After hearing this, second year Josh Neumann, who organized the trip for Anderson, exclaimed “Short the 29 year and go long the 30 year sounds so simple! I’m gonna be rich!”

Buffett also talked what he has learned from his failures, and said that experience has taught him that an enduring brand and strong management that loves their business – not just the money – are key. Although he obviously did not offer any hot stock tips, he did suggest that there are always opportunities in the market, if you are willing to look around; he pointed to the REIT sector in 1999-2000 and Korean stocks two years ago as places where he has found value in the past. In response to a question about China, Buffett said the incredible growth there was real and sustainable, now that the country has caught onto a system that the United States learned 215 years ago. However, he seemed to be more excited about the prospects for China as a consumer of products, rather than as a source of investment ideas, although Berkshire does own a substantial stake in state-controlled PetroChina.

After the Q&A, Buffett took both groups to lunch, and offered to drive five students over to Gorat’s in his brand new Lincoln Town Car (license plate: THRIFTY) that, according to locals, recently replaced his old Ford pickup.

In a positive omen for December’s big game, UCLA won the coin toss vs. USC for the fifth and final slot in the car. However, according to passenger (and second year) Lynn Wang, Buffett’s investing acumen doesn’t necessarily translate to good driving skills. “All I can say is that it’s a good thing he has GEICO insurance,” Wang said.