Editor's note: Durango resident Walt Dear recently attended the annual shareholder meeting of Berskshire Hathaway and gleaned these tips for smart investing in the stock market.
Nonshareholders can attend the Berkshire Hathaway annual shareholders meeting in Omaha, Neb., for $5 and get a million dollars worth of advice for free.
That was one of many pieces of information I learned when I attended Warren Buffett's company meeting May 2 in Omaha with my son, Bryan Dear.
Buffett and fellow billionaire Charlie Munger talked for five hours. Buffett, 78, perhaps the most famous financial adviser and investor in the U.S., is a majority stockholder in Berkshire Hathaway, known as BRK on the New York Stock Exchange. Munger is vice chairman of BRK's board of directors.
About 35,000 people - a record number - attended. Some had come to air grievances, but most seemed to be there to glean financial advice to deal with what is being dubbed "The Great Recession."
One of the main messages the two men gave to investors was straightforward: You don't need a Ph.D., a computer or even a calculator to make rational judgments about the markets. Instead, read, read and read again, and then develop a philosophy that makes sense to you.
The Buffett strategy has been to buy unknown bargains with these characteristics: The companies are monopolies or near monopolies; they have brilliant management; they offer products or services that are unique or almost unique; and they produce something that will be needed in perpetuity.
Buffett cited Coca-Cola and Geico, the auto-insurance company, as examples of such companies.
While neither Buffett nor Munger offered many specific investment tips, both spoke positively - and often - about Wells Fargo. Buffett also was ecstatic about Geico, which now ranks third in the auto-insurance business.
Geico is spending $800 million a year on advertising and picked up 650,000 new accounts in the last year or so. (Buffett bought his shares for peanuts, and it's a roaring success today). Buffett says he wouldn't mind if Geico spends more on advertising.
Buffett also suggested considering investments in USA Bank and BYD, a Chinese battery maker.
MidAmerican, a subsidiary of BRK, has a 10 percent interest in BYD, and Munger was practically goo-goo eyed about this company.
Munger was especially keen about Chinese investments in general.
China has one of the best financial managing systems in the world, he said, and the country will be hard to compete with in the future.
While also optimistic, Buffett sounded a cautionary note: He believes BRK will do well with utilities and the insurance business, but investments in companies that deal with real estate, bricks, retailing and carpets are going to continue to be down in 2009.
As you ponder whether to buy a stock, Buffett suggests a bird in hand is worth two in the bush.
You also have to calculate how many bushes there are, how many other people are trying to capture the same birds and the value of each bird in the hand or not. In other words, be careful before taking a financial risk (or plunge).
But that cash pile shouldn't get too high, Buffett said. After you've done your homework, you should be ready to make a substantial investment. This takes a lot of cash - and guts. When it comes to making the big move, many investors are wimps, Buffett said. This is where you need nerves of steel, and of course it helps to have billions of ready cash.
Before coming to Durango, Walt Dear published The Gleaner in Henderson, Ky.