Lesson for Indian companies in Buffett handover; new Berkshire CEO likely to bet on hard assets: Raamdeo Agrawal
Raamdeo Agrawal, Chairman, Motilal Oswal Group, says the upcoming economic era will prioritize wealth creation through investments in tangible assets like energy distribution. Experts like Buffett and BlackRock foresee substantial opportunities in infrastructure projects, potentially reaching $68 trillion. Future balance sheets will likely emphasize strategic investments in hard assets over traditional stock ventures, limiting large-scale investments in individual companies.
How many times have you gone for the teerth yatra (pilgrimage) to Berkshire Hathaway AGM?
Raamdeo Agrawal: At least 25 times.
How old are you sir? I know Buffett is 92 but…
Raamdeo Agrawal: I have been going since 1995 onwards. Initially it was not streamed. They started streaming just four-five years back. Till then, it was very relevant to go there and listen to him first hand and not to wait for some reporters to report it. But now we have the network, we have a lot of people coming in and listening to him and getting the energy in the hall. I think these are two different things compared to just streaming.
Every Berkshire Hathaway AGM has a lot of hints, a lot of repetition, a lot of wisdom, and a lot of takeaways. What did you pick up which is old but full of wisdom?
Raamdeo Agrawal: I do not know how to structure it but the thing which I learnt is that running a $640 billion balance sheet and a $1.2 trillion company is a different ballgame from what he started with in 1965 when he was running maybe a $100 million balance sheet. So, now, the responses are different. He has got $350 billion of cash in hand which is 50% of the balance sheet and the new guy comes in.
So, he has built this company his whole life and today he has handed it over to a CEO. He said now the buck stops with Greg and he has nothing to do with this and he will be there only in an advisory capacity. It is quite a lesson in transition is being handled of this size of the company and he has also nominated his son Howard Buffett as the chairman in case something happens to him. So, from Berkshire's shareholders point of view, the uncertainty which was there about the longevity of the management has been fully taken care of.
This is a good lesson for a lot of Indian companies which started in the 80s and 90s and now the owners are aging and have to hand over to the next generation. Second, the nature of the investment will change because his competencies were very different. Buffett's own competency is more in investing and bringing people together and running a lot of companies. If you see the history of 60 years – they have given a book of 60 years of Berkshire, that is one book which was distributed or sold – one of the things is that over a period of time, they have been continuously acquiring companies and integrating with Berkshire. I think the biggest money was made by his investment in Apple, upwards of $150-200 billion. So, his investing prowess probably would not be there with Greg and Ajit. For the new dispensation, the way to create wealth will be very different and it will most likely be hard assets like energy distribution and all. Greg's strength is in hard assets and my sense is that even Buffett was alluding to the fact that there is a lot of opportunity for building up infrastructure projects in the US. If you see the BlackRock's annual report, even there they are talking about $68 trillion of infrastructure possibilities in the years to come. So, my sense is that the balance sheet will look different going forward and they will create value by investing effectively in hard assets rather than new stock ideas. I would be surprised if they are able to take a bet of $100, $200 billion into a listed company or even unlisted, but by way of a stock.
For the historical cash Berkshire is sitting on, are they are not finding opportunity or are they bearish or do they expect markets to fall because when the most successful long-term investing firm in the world is sitting on cash levels which are higher than what they have ever sit on, it makes you wonder if Berkshire Hathaway is telling you that the markets will fall?
Raamdeo Agrawal: He used to always say do not bother too much about what I say, do what I do. Going by that, he is clearly taking a cash call in the market and he thinks that market is at a high and probably he was also aware of what could mean to be under a Trump presidency because Trump has already talked about how he will take up the tariff issue once elected. So, probably just to pre-empt that, Buffett might have decided to sit on cash. But he did not seem to be bearish. At least in the AGM, he seemed to be pretty alright and they are looking for ideas and investing.
My sense is they are starting with $350 billion of cash and annual operating profit now is $40 billion plus. So, we are looking at about more than $500 to $600 billion in the next five years of investing and that can be done only if you go for hard assets or businesses which are capital intensive rather than intangible intensive. So, I would think that they will bet big on some cross-country infrastructures in roads or ports or electricity transmission. So that is a very different character of a company than what we have known so far.
Hypothetically, if you had to invest that $350 billion which Berkshire Hathway is sitting on and you know their investment philosophy, the fact that they understand their competence which is COC or circle of competence, which is that one Indian company where yu would invest if you have $350 billion to invest in?
Raamdeo Agrawal: I would buy the Indian market only.
No. That is generic. Indian markets are not cheap. There is no fear in the Indian market.
Raamdeo Agrawal: The issue is what is your investment style? My style is to look more for growth because it is an inflationary economy and I would bet big on growth. They missed out on Amazon but now Amazon of India is coming up, and I would not like to miss that opportunity. Quick commerce and all which is building up very rapidly and are very large. You can put $5-10 billion into this particular kind of company, so that is where I would look at it very seriously.
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