I was part of a small group that did the Berkshire Hathaway Pilgrim thing on Thursday – went shopping at subsidiary Nebraska Furniture Mart (the biggest store of its kind worldwide); had the T-Bone, hash browns and cherry coke at Gorat’s (Warren Buffett’s favourite steakhouse) and got the taxi driver to take us to the Buffett family home where we clicked away in awe that such a rich man is happy to live so normally. Then it was off to the Value Investor Conference where organiser Bob Miles had drawn some of the world’s best to share their thoughts and insights. This diary posting shares the day’s events. – AHÂ
ALEC HOGG:  Good morning. It’s just gone 6:00 here in Omaha. I have my first cup of tea. Oh man, isn’t it the best – that first cup of tea? I’m bringing you up to date on the actions, and what happened yesterday – quite an incredible visit. It’s a little bit like Davos. Every year I go, it just seems to get better. Now, I don’t know if it’s because I’m getting older and I’m appreciating things more. Perhaps, I know I’m one step closer to the big conference in the sky, but these two: the Berkshire Hathaway Annual General Meeting in Omaha and the World Economic Forum in Davos are just such amazing adventures for me nowadays, that it feels like much more happens and I learn much more. Yesterday was incredible. Remember, we only begin tomorrow. We’re really here for the Annual General Meeting on Saturday. That’s when Charlie Munger, the Vice-Chairman of Berkshire Hathaway and of course, the very famous Warren Buffett sit for five-and-a-half hours and answer questions. It’s a bit of a ‘Berky’ week. We do come here a little bit earlier to see others who are interested in value investing and then to just experience the whole Berkshire Hathaway weekend and it’s been rather like that.  Yesterday, the weather was awful. It reminded me of Davos.  Fortunately, I did bring my Davos long johns (thermal underwear), so I was pretty comfortable the whole way through. I met Kokkie Kooyman. He’s the leader of the South African delegation and has been for some years now. He tells me it’s his 14th time that he’s been coming. I met him in the lobby and we had a fabulous day together. There were many other old friends there; Paul Boynton and quite a few others, but I’m sure I’ll be talking to them in the next day or so, so we’ll have their inputs, too.
Kokkie says this year he has 54 guests that he’s brought here from South Africa to Omaha. I’m gobsmacked. He’s been coming for 14 years in a row. We worked out that I came for the first time in 2005 and I’ve actually been, during the period from 2005 to now, I’ve missed twice to go to World Economic Forum in Africa assignments, which unfortunately do coincide on the same weekend. I guess this would then be my eighth visit, so it has been one of those experiences that just gets better and better.Â
Yesterday, we did the real Berkshire Hathaway thing – the pilgrim thing. We went off to the Nebraska Furniture Mart. Now, I haven’t done this in the eight times I’ve been here, so it was quite an experience. I visited there once before, but never gone shopping. It’s a 77-acre operation. Now, work that out. On the farm, we had 30 acres, so it would have been our farm in KZN doubled and then another half again. That is huge. You really don’t have time to go around the whole of Nebraska Furniture Mart. This is of course, a Berkshire subsidiary and if you know much about the Berkshire story, the famous Rose Blumkin was the lady who started the store. It’s worth repeating because she died at 104 after working until she was 103 years old. Immediately after she passed away, Buffett decided that the official retirement age for all Berkshire employees would be then 104 to make sure that someone works right up until the time they get into their little gussie in the ground.Â
Anyway, Nebraska Furniture Mart is also the biggest store of its kind in the world, and it’s so big. You have these satellites you have to go into. Of course, being boys (there weren’t any ladies with us) we all went for the electronics side and I could have spent five hours there, just looking around. It’s about…I worked out about nine rugby fields big, so far bigger than anything I’ve seen before. It certainly puts anything in South Africa well into the share. Last year, they turned over $40m at Nebraska Furniture Mart because they do offer special discounts only for this weekend and only to Berkshire Hathaway shareholders or attendees of the meeting. I have a press badge although I’m not a shareholder, so I qualified as well. It’s hard to resist. The prices are unbelievably low and then you get a little discount on top of it. Last year’s Saturday they did nearly R100m worth of turnover in this one operation, so it shows you how large it is and exactly how supportive the Berkshire Hathaway shareholders are.Â
After Nebraska Furniture Mart, we did another pilgrim thing and that was going to Gorat’s for lunch. Gorat’s is a steakhouse, which Warren Buffett loves. It’s very close to his home, which of course, we went to go see as well. I put pictures of his home up onto Instagram, through to Twitter and Facebook so you can go and look at that. It’s extremely modest – his home. There’s no electric fencing around it, although I did (it wasn’t just him), but I did see that the grass on the curb ways…there were little warnings, which said ‘don’t step here. There are hidden electric wires under the grass’, so I guess that’s to stop people from walking on the grass rather than to prevent any burglaries or anything.Â
The cab driver who took us there was quite a character himself. He spent three weeks of the year in New Jersey acting as Santa Claus, and he looks like Santa Claus, a guy called Geoff Friedman I think his name was which is kind of a Jewish name – unusual name for Santa Claus. Anyway, that’s what he does. He was very happy to take us to Warren’s house. He said he’s not going to go onto the driveway though, because if you step onto the driveway, a security guy will come out and chase you off the premises so we didn’t want to get into that kind of trouble. However, I did take many photographs and there was a security guy as well.
We then arrived at Gorat’s, one of Warren Buffett’s two favourite restaurants. I haven’t been to Piccolo Pete’s, which the other one is, but we’ve been to Gorat’s a few times in the past and every time has been terribly disappointing. The reason is that we did it on a Friday night. That’s when there are tens of thousands of Berkshire pilgrims in town, and to get into Gorat’s on a Friday night is in itself, quite an exercise. Kokkie Kooyman’s team…Nora Geldenhuys, his very trustworthy PA who sorts everything out (accommodation for us etcetera), used to phone months before to get a booking and when we arrive there, we’d wait three, four, or maybe five hours before we finally got in. The food was very ordinary, to say the least and well, I could have done without it again.Â
We decided there were many new guys around with us, a little group of nine yesterday, most of them were new, so let’s do the Gorat’s thing. I phoned. We got in. We got a booking immediately when we arrived there. Clearly, the pilgrims from America and elsewhere in the world haven’t come through yet to Omaha, so we were able to have a splendid meal. I took a photograph of the T-bones because of course, when you go to Gorat’s you order what Mr Buffett orders and Mr Buffett orders a T-bone, he orders a Cherry Coke, and he orders hash browns.  That’s what you eat, so that’s what everybody ordered. I took a photograph of the guy sitting next to me – his T-bone – and then put it up onto Instagram with a little comment saying ‘well, thank goodness they haven’t discovered the Grillhouse’s basting, otherwise I might have to emigrate’, and ‘well done’ to the Grillhouse. Someone there picked it up and retweeted back saying ‘they’ll never get our basting. We don’t want to lose you as a customer’. I didn’t realise I was that important as customer, but thanks anyway. Nothing quite compares. It was interesting. When we were talking about Gorat’s later, a couple of the South African guys who weren’t with us asked ‘are they as good as the Grillhouse’, and as good as it was – and the steak was excellent – there’s only one Grillhouse.Â
It was then onto the other thing, which we’d been trying to do since arriving here, and that’s getting hold of Howard Buffett. Now, Howard is Warren Buffett’s eldest son. He is the next Chairman of Berkshire Hathaway and he’s a South African resident. I met Howard a few times through various bits and pieces and we’ve kept in contact over the years. He’s just the most wonderful human being: a humble, ‘feet on the ground’, travels a lot, loves South Africa obviously, as a permanent resident there, and has a farm. He used to have a cheetah conservation farm called De Wildt, which he sold. He moved on and he’s farming in I think, the Limpopo Province. What an asset to South Africa this man is. Can you imagine Chairman of the fifth most valuable company in the world is going to be sitting for much of his time, in South Africa? Anyway, I dropped him an email and he called, and said ‘are you guys at your hotel? I’ll pop around and come and see you later’. As you can imagine, he has a crazy week. Not only does he sit on the board of Berkshire Hathaway as well as on the board of a company called Lindsay’s, and the board of Coca Cola, so he has many people to see but he said he’d make an effort to come and see us. Anyway, more of that later.
It was then onto the Value Investor Conference and this is one of the reasons I arrived early – the prime reason really. It sold out more than three weeks ago, and you could see why. The cast Bob Miles put together is absolutely fantastic. When I come back to South Africa, I’m going to be sharing what I’ve learned at the Value Investors’ Conference on the 31st with clients of Standard Bank Online. In fact, I have to thank Standard Bank Online because they’re a fabulous sponsor and have been for years. They helped me to meet the costs here by guaranteeing that when I get back, I do presentations. This year, I’m doing four: a couple in Johannesburg, one in Durban, and one in Cape Town just on the Berkshire Hathaway adventure, and what Warren Buffett taught us. This year, on the 31st of May, I’m also doing a full-day session on value investing, picking up the information I’ll be learning here.Â
When we got to the Value Investors’ Conference, I was all ears. Yesterday, there were four presentations. Pat Dorsey, a guy who’s very well known as the Head of Research at Morningstar, and has moved on to his own company was fascinating, particularly for South Africans and there’s a big South African contingent. Outside of North America, we’re the second-largest group at the Value Investors’ Conference behind – sadly – Australia. Anyway, it was good to hear the South Africans in the audience. David Shapiro of course, was there. He loves this kind of thing and he loves Berkshire. Since he arrived maybe eight years ago, he’s been coming every single year.  David stuck his hand up and asked a question – not surprisingly – because in his presentation Pat Dorsey said (now remember, this is one of the top value investors in the world and quoted all over the place, too). He said one of the secrets is that you have to have…there are some ‘insanely great’ as he called it, resource allocators – allocators of resources. That’s what value investors look for. They look for people who are just brilliant at it, and he had a whole list of names: Tom Malone from Two Cities. Who was on the list? Brian Joffe from South Africa of course – one of David Shapiro’s good friends – so David puts his hand up during question time and said ‘Pat, what about Brian Joffe? What if he goes…what will happen to Bidvest then?’ It was interesting to get that answer, which was obviously a bit long to go into here, but it was one of three mentions Pat had about South Africa.Â
I can tell you we’re a tiny country. We are one-seventy-fifth of the GDP of America. Indeed, if we were an American state, we would only come in at number 17 behind Indiana (and don’t ask me Indy who). To hear Pat Dorsey talk firstly about Joffe, then about South African retailers that he said once he discovered them he couldn’t believe what a beautiful investment opportunity they were (not such good news this one, for consumers), but he says that because of the oligopoly between retailers, they just print money there. You therefore have this (I can’t call it a cabal), but this little group of retailers who are globally generating returns on investment, which are just so far in excess of other retail companies in the world that it’s a place to come and put your money, says Pat Dorsey.Â
It reminds me of the radio companies in South Africa that generate 50 percent EBITDA. When I tell people this in other parts of the world, they shake their heads and say ‘that can’t be so’, but we have a Regulator who licenses for profit so we have the most profitable by far, radio stations in the world. I think Gareth Cliff is going to change that with what he’s doing.
The other point Pat Dorsey made was he discovered there that not too many analysts look at all the top companies, and he mentioned PSG as being one of the top companies in the world since its listing about 15 years ago, generating 45 percent return on capital. He says that in the world, only two analysts who look at Jannie Mouton’s company. That was Pat Dorsey’s inputs. Of course, we as South Africans pushed our chests out. Here we were in this audience of maybe 80 top value investors from around the world and our little country go quite a nice showing.
The second person to talk was also fascinating – Rob Vinall. He’s a relatively young guy – I guess he’s in his early thirties – he gave a fabulous presentation. He manages a fund of $120m, so it’s not that big, but he only has ten stocks. Of those ten stocks – and this was a recurring theme – one of his biggest ones was Google. When I came here three years ago, I think it was, Warren and Charlie were talking about Google as a company whose business model was so good that they couldn’t find a hole in it. Well since then, many value investors have reassessed the way they do value investing and adding Google to their portfolio. Rob Vinyl is amongst them. What really got me interested was when I saw in the ten stocks he owns – one of them is Baidu. Now Baidu, you might know is a direct competitor with Tencent in China, and Tencent is a company that is 30 percent owned by Naspers, so all of Naspers’ share value is actually locked up in Tencent. You’re getting pretty much the rest of Naspers free. Of course, I had an opportunity here to question him a little bit, and I asked him ‘why Baidu…why not Tencent?’ He went into quite a long explanation on it, but in essence, it’s just because he understands the Baidu model better. It reminds him directly of Google because it’s in search, whereas Tencent he admits probably has a better entrepreneur, but he just doesn’t know the model. He can’t overlay the model on Facebook or any of the other things he knows from the Western world. That was a fascinating bit of information.
We then had two other presentations that I don’t really have time here (to bore you) to go into…Tom Gainer’s company called Markel, which is very similar to Berkshire Hathaway, so some extremely useful insights there.Â
We then ended up at dinner, which they put on for us again. Omaha steak is terrific, but I’ve never had this kind of dinner before. I guess it’s only in Omaha – only in the United States – where it was plated, so you sat down, they brought you your salad to start with, and then they brought you your main course. The main course here was salmon – a serious piece of salmon – and steak – and that was a serious piece of fillet – so talk about ‘surf ‘n turf’…not in the South African style of prawns and steaks. This time it was Omaha steak and lovely salmon, and I had a great conversation as I always do with Kokkie Kooyman. He has his son Ben here with him. We had the South African team comparing notes, and then the phone rang. It was Howard Buffett. Of course, I just nipped out quickly and said ‘nice to hear from you’, and he said ‘where are you guys’, so I told him.Â
Unfortunately, we were on the other end of town because the Value Investors’ Conference is at the University of Nebraska and Howard had gone downtown, and got out of his board meeting early to come and see us at our hotel, which is unfortunately downtown…about 25 minutes away from where we were. We therefore missed him, but he did promise that he would do his utmost to find a half hour here or there to come and shake hands with the South African delegation. We had dinner with him a few years ago. I remember Ray Cadiz, his brother Frank and Steve Sanders were there. Raymond, one of the characters of the South African investment community, was really teasing Howard quite a lot and ribbing him, and it was a memorable evening. Howard is one of the stars of the show here, so to get him to come and say hello to the South African delegation, who he regards by the way as countrymen, would be quite special, so let’s hope that does happen. I have my doubts though, because I think his diary now must look worse than any diary I could ever imagine.
Well, that’s it for my diary posting for today. I hope you come back again over the weekend. On Saturday (tomorrow) for the rest of the day, I’m going to be at the Value Investors’ Conference. It’s a full-day session, so I’m going to be learning so much. Tomorrow is the big Annual General Meeting and I’m going to be tweeting live from the AGM. I’m very lucky to be part of the press contingent. We get terrific seats up in the skybox. I’ll get there early, get myself set up, and then as the meeting progresses, I’ll be tweeting through it. If you don’t follow me yet on Twitter, go to @alechogg and follow me, and tomorrow it will be as though you’re with us here. Remember, it starts at 8:30 Nebraska time, so you can add eight hours to that, so let’s say round about 4:00pm/4:30pm, but it goes on for five-and-a-half hours. If you’re a Buffett fan, then hopefully you’ll be with us next year, but hopefully, you’ll also enjoy all the tweets I’ll be sending through.
Okay, guys. Enjoy your day and your weekend, and I’ll be catching up with you tomorrow or perhaps even later this afternoon. Cheers.
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