During the 1994 Berkshire Hathaway Annual Meeting, Warren Buffett advises caution regarding business projections and inflated valuations, suggesting that genuine value assessment requires essential, straightforward data.
He emphasizes that Berkshire Hathaway’s reports contain all the critical numbers that he and Charlie Munger use to evaluate investments, encouraging investors to independently analyze these figures rather than relying on flashy presentations or optimistic narratives.
Buffett notes the importance of transparency and relevant financial details, such as the insurance business’s float, while dismissing superficial indicators like pictures of happy clients as irrelevant to a company’s true worth. He values substantial information over marketing gimmicks in assessing a business.
Here’s an excerpt from the meeting:
Buffett: Beware of people that give you a lot of numbers about their businesses. I mean, in terms of projections or valuations or that sort of thing.
We try to give you all of the numbers that we would use ourselves in making our own calculations of value. We really — if you read the Berkshire reports, you essentially — you have all the information that Charlie and I would use in making a decision about the security.
And if there’s anything really lacking in that respect, you know, we would actually — we would truly appreciate hearing from you, because we want to have that kind of information in the report.
But then we want you to make the calculation. But we’ve stuck, I mean, that material, for example, on the float in the insurance business, we consider that quite relevant, obviously, because we use up almost a page printing it. It’s pretty serious stuff at Berkshire.
But that is relevant. I mean, your interpretation may be different than mine or Charlie’s, but those are important numbers. And we could give you a lot of baloney about satisfied policyholders, you know, in Lincoln, Nebraska.
It wouldn’t tell you a thing about what the company’s worth — and have pictures of them, and happy, you know, receiving the check from the agent and all of that.
We’re not going to do that.
You can watch the entire meeting here:
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