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3 key takeaways for Aussie investors from Warren Buffett’s annual Berkshire meeting

The annual Berkshire Hathaway meeting in Omaha is one of the more significant events on investors’ calendars as it’s one of the rare times that they can listen first-hand to the thoughts of Warren Buffett and Charlie Munger on the issues affecting the market.

The 2018 meeting held on Saturday was no exception and the great legends of the investment world didn’t hold back on calling out the good, the bad, and the ugly.

From the reports on Bloomberg, most of Buffett’s and Munger’s commentaries were on specific issues relating to the investment company Berkshire Hathaway, although there are three key topics that the investment gurus spoke about that will be of interest to Australian investors.

The first is their dire warnings on cryptocurrencies (or cryptos) even as Bitcoin found a new powerful supporter in Goldman Sachs, which is setting up a trading business on Bitcoin futures.

That has not dampened their despise for digital currencies with Buffett reiterating his prediction that no good will come of investing in cryptos as they rely on the greater fool theory, in which the only way for investors to see a return on their investment is to find another sucker willing to pay an even higher price for something that doesn’t have any intrinsic value.

What’s worse, Buffett added that cryptos will attract a lot of “charlatans” and people with questionable characters and motives (surely he wasn’t referring to Goldman Sachs!).

Munger had a more colourful way of describing these digital tokens, according to the Bloomberg article which quoted him as saying it’s like “somebody else is trading turds and you decide, ‘I can’t be left out.’”

The second thing of keen interest to investors here is their view on Australia’s largest and arguably most important trading partner, China.

There’s good news on that front, particularly for miners like BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) which are directly exposed to the Asian giant. Buffett and Munger expressed confidence that a damaging trade war between the US and China will be averted.

They are also optimistic on Chinese economic growth and Buffett commented that he should look at doing a deal in China as he turns 88 this year. The number “8” is a symbol of luck to the Chinese, and while his comments are perhaps made half tongue-in-cheek, I do believe he is interested in exploring opportunities in that country given that he is struggling to find value-adding deals in the US.

The last key takeaway is their retort to fellow US billionaire Elon Musk. Musk had mocked Buffett’s concept of a “moat” to describe businesses that can successfully repel competitors.

Given that Musk is a “disruptor” to traditional industry leaders, it is understandable why that ideology doesn’t rest well with him.

While Buffett acknowledged that even companies with wide moats seem to be more vulnerable in this day and age, the competitive advantage that is inherent in Berkshire’s See’s Candies business is still as strong as ever.

To which, Musk responded through Twitter that he is going to start a candy company to rival See’s and he said he wasn’t kidding.

The irony about this debate is that even “disruptors” have moats. Look at the likes of REA Group Limited (ASX: REA), Carsales.Com Ltd (ASX: CAR) and SEEK Limited (ASX: SEK). These businesses have easily kept ahead of emerging rivals as they have capitalised on their first mover advantage and enjoy the protection afforded to them from their market reach.

While maybe the term “moat” could benefit from an update, few would argue that the concept is still relevant today.

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Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and Rio Tinto Ltd. The Motley Fool Australia has recommended carsales.com Limited, REA Group Limited, and SEEK Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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