ownership

The Rights of Shareholders? An Owner Is an Owner  
Photo of Warren Buffett surrounded by reporters with microphones

Photo courtesy of AP

Clients, the hallmark of our investment strategy is ownership of companies whose outlooks are favorable, in our view. A share of stock is a piece of the action: ownership of a fraction of an enterprise.

We have owned businesses in very old lines of work, like manufacturers of farm equipment. And we’ve owned companies in new lines of work, like cloud services. We’ve been in airlines and autos, software and chipmakers, miners and medicine.

Owners have rights. We elect directors. We receive our share of dividends paid. We get annual reports—and have the right to attend shareholder meetings.

Most of us pay little attention to the trappings of corporate governance, with one exception.

Held in Omaha where its long-time leader Warren Buffett was born, Berkshire Hathaway hosts one of the largest annual shareholder meetings on the planet, with tens of thousands of people descending on the city for the festivities.

Each spring, information about Berkshire subsidiaries and the products and services they offer is shared during this corporate tradition. You can buy everything from insurance to ice cream treats. Visitors learn about companies as diverse as railroads and homebuilders.

Did we mention? Shareholders also happen to get discounts at Nebraska Furniture Mart, Borsheims, and other retailers.

For many years, Buffett himself and key leaders would entertain questions from shareholders for hours, before conducting the business of the annual shareholder meeting itself. Some say that Buffett is among the most successful investors in the history of the world: when he stepped down as CEO of Berkshire at 95 years of age, his longevity also became cemented in his legacy. He’s not alone in that in Berkshire history, either: the late Charlie Munger, long-time vice chairman, passed at age 99.

Buffett, Munger, Buffett’s descendants, and other individuals and entities have owned a vast swath of the voting control of the company over the decades.

But here’s the thing: an owner is an owner. Even a single share of stock entitles the holder to certain rights. Shareholders may inspect select corporate documents, beyond those already published and available to the public. They can nominate and send in votes to elect members to the board of directors.

And they’re allowed to participate in the annual meetings.

This spectacle of Omaha is a powerful reminder of the meaning of ownership. It’s getting a piece of the action—and being part of something bigger.

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Clients, if you have an interest in attending or taking advantage of other opportunities, you’ll need shareholder credentials. A form to order those should be included in Berkshire’s Annual Report, or you can stay tuned for more details from us in the weeks ahead. 

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time. Companies mentioned are for informational purposes only, and this communication should not be considered a solicitation for the purchase or sale of their securities. 

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The Single Best Investment for New Grads? – 228Main.com Presents: The Best of Leibman Financial Services

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Warren, Charlie, and Us: The Rights of Owners 
AP Photo

The hallmark of our investment strategy is ownership of companies whose outlooks are favorable, in our view. A share of stock is a piece of the action: ownership of a fraction of an enterprise.

We own businesses in very old lines of work, like manufacturers of farm equipment. And companies in new lines of work, like cloud services. We are in software and chipmakers, miners and medicine.

Owners have rights. We elect directors. We receive our share of dividends paid. We get annual reports, and have the right to attend shareholder meetings. Most of us pay little attention to the trappings of corporate governance, with one exception.

Warren Buffett holds one of the largest annual shareholder meetings on the planet, with tens of thousands of people descending on Omaha for the festivities.

On the first weekend in May, information about Berkshire subsidiaries and products they offer is available at the meeting venue. You can buy everything from GEICO insurance to treats from Dairy Queen and learn about companies as diverse as Burlington Northern and Clayton Homes. Did we mention? Shareholders also get discounts at Nebraska Furniture Mart and Borsheims.

At the May meeting, Buffett and other key people will entertain questions from shareholders for hours, before conducting the business of the shareholder meeting. Some say that Buffett is among the most successful investors in the history of the world; at 94 years of age, there are only so many more chances to witness him at this event. (Charlie Munger, former vice chairman, passed away in 2023 at age 99.)

Clients, if you have an interest in being part of this, you’ll need shareholder credentials. In past years, there has been a postcard to order those included in the Annual Report, or you can let us know if we can help you obtain credentials. Stay tuned for more details in the weeks ahead.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss. The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time. Companies mentioned are for informational purposes only, and this communication should not be considered a solicitation for the purchase or sale of their securities.

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Play the audio version of this post below:

2024 edition: Warren, Charlie, and Us on the Rights of Owners – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

The “Company” We Keep
A group of magnifying glass
by Billy Garver, Data Analyst

How many strangers do you know? This isn’t some Zen riddle, but this question is trickier than the gut answer of “zero.” At one point, wasn’t your best friend a stranger?

As we meet new people, we may decide to remove the “stranger” label in favor of “acquaintance.” We learn the basics of the person at that point—name, occupation, and so on. We may develop a closer relationship, learning more intimate details. How’d they get where they are? And how are things going now?

We take a similar approach when building portfolios. When an investment opportunity arises, we may or may not have any prior experience with the company. We start by getting to know the basics—what they do, why they do it, how long have they done it, and so on.

From there, we may opt to remove that “stranger” label and start going deeper. When getting to know a company, understanding the company’s management, cash flows, and debt loads gives us a clearer picture. Only then does a company have a chance to enter your portfolios—the real inner circle!

Our relationship with the company doesn’t end there. Quarterly, we review each holding—making sure their business hasn’t deviated too far from what we expected. We check whether our understanding of the fundamentals is playing out.

Why does all this matter? Well, especially in the bumpiest of economic times, you don’t want any strangers in your portfolio. A swift change at the macro level can completely upend a business model. One thing that helps us weather the storms is knowing how our crew might navigate their way through them.

Being friends with the companies you own—being familiar with the details of their operations—helps prevent some of those big surprises in the long run. (Of course, it never eliminates the possibility of a surprise; friends can change and friends can make mistakes).

But, in the long run, it may pay to be careful of the “company” you keep.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss.

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The “Company” We Keep – 228Main.com Presents: The Best of Leibman Financial Services

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It’s a Market of Socks!
photo shows a rainbow of socks clothes-pinned to a line with a sunny sky behind it

Imagine buying a value pack of socks. Unlike your everyday value pack, this one contains 500 pairs of socks, and every single pair is different. Some are ankle-height, some crew. Some black, some brown. Some striped, some filled with pictures of cheese. Some will become your favorite socks ever, and some of them you’ll become embarrassed to own.

All in all, the pack could still turn out to be a good deal, right? But one more thing: you can’t break up the set. If you really wanted to return one pair of the value pack, you’d have to toss all 500 pairs back. Even those favorites!

Things could get hairy. If you ever needed to pull back, and no longer had room for 500 pairs of socks, you’d have to clear house and start from scratch. Discover that one sock had a hole? Live with it, unless you’re ready to pitch the other 999 socks too.

Doesn’t it sound like more fun to only buy the socks that you like best? Socks that you can actually imagine owning? Or socks that may have untapped potential (think of those warm, fuzzy ones you’re glad you got for the depths of winter). And—when you need to get rid of a sock—you’re not losing your whole collection.

Some people do buy stocks that way in effect: indirectly, 500 at a time. But what a tremendous privilege and exciting challenge to pick only those stocks, I mean, socks that you find most worthwhile.

Clients, if you have any sock tips, email or call.

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Play the audio version of this post below:

It's a Market of Socks! – 228Main.com Presents: The Best of Leibman Financial Services

This text is available at https://www.228Main.com/.

A Share of What?

© Can Stock Photo / tvirbickis

Some people invest in common stock without even knowing what the company does. To them, a stock is price on a screen that can be bought and sold minute by minute—day-trading, they call it. Those people study price charts, not financial statements.

At the other end of the spectrum, investor Warren Buffett understands that a share of stock is a piece of a business—a share in an enterprise. He once said it would not bother him if they closed the stock market for ten years: he is happy to own percentages of businesses.

We suspect that many of you have an understanding that is somewhere in between these two views. We would like to offer you a little more perspective on what ownership is, and what it means.

Recently, in analyzing a company many of you own, we broke it down to what $1 invested represents. We’ll call it Company X, the leader in its industry, a blue chip company.

$1 invested today, whether you just bought in or paid half that amount some years ago, represents a certain amount of revenues—sales of goods by the company. It also represents a share of income and dividends (cash paid to shareholders).

Each dollar of ownership value in Company X represents 32 cents worth of revenues this year. After expenses, the company’s net income for the year will be between seven and eight cents per dollar of today’s stock value. If the Board of Directors continues to approve quarterly dividends at the recent rate, each dollar of stock value will get close to 3 cents in cash dividends.

For long term owners, this year’s results are of interest but the outlook for the future has a large impact on how the stock price will change. For this reason, we seek to understand the relative value today, but also the potential for the company to reap its share of future growth in the American or global economy—to increase its revenues, income, and dividends.

This work is totally captivating, if you are us. Clients, many of you have told us this is why you hire us—your interests lie elsewhere. They say it takes all kinds to make a world; we’re glad to know your kind. If you’d like to talk about this or anything else, please call or email us.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

Renting the Oil Company

© Can Stock Photo Inc. / fredgoldstein

We all seem to know intuitively that rent on a residence covers all the expenses of ownership, plus a profit for the landlord. Hence most people prefer to own their homes rather than pad the landlord’s wealth.

And yet when we buy a gallon of gasoline, we are paying all of the oil company’s expenses plus a profit for their owners. We pay the cost of refining crude oil into gasoline, transporting it to retail locations, or running the store at which we purchase the gasoline. Not to mention the cost of exploring for and pumping the crude oil and shipping it to refineries.

But if we own a piece of the action (in the form of shares of common stock) in an oil company, we indirectly own a share in the oil wells and refineries and transportation and everything else needed to put a gallon of gasoline within our reach. Own or rent? We prefer to own—and by the way, if you prefer to rent, thank you for doing business with our oil company!

We and our clients own phone companies and clothing manufacturers and car makers and raw material producers and major retailers and airlines and nearly every other segment of the economy. From the time we wake up and brush our teeth, put on clothes, go to factories and shops and offices, use energy through the day… we are doing business with ourselves. We are owners, not renters.

It is our opinion that a person who owns no common stock or other business rents everything: the refineries, auto manufacturers, food distributors, trains and planes, communications networks. They are paying rent for everything that goes into their life, without receiving any benefits of ownership.

Rent or Own? You might want to own shares of companies for the very same reason you prefer to own your home. We are available to discuss whether this philosophy fits into your plans and planning—call or write.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Stock investing involves risk including loss of principal.

Because of their narrow focus, sector investing will be subject to greater volatility than investing more broadly across many sectors and companies.