Berkshire Hathaway ‘has a very deep culture,’ Check Capital Management CIO says

Check Capital Management President and CIO Steven Check joins Yahoo Finance Live to discuss key takeaways from Berkshire Hathaway’s annual shareholder’s meeting, Warren Buffett’s succession plans, and the outlook for GEICO.

Video transcript

- Well, one other question rising from Berkshire Hathaway's annual meetup, who comes after Warren? Even as Buffett, among a whole cohort in Omaha, Nebraska, questions about their succession plans still linger. Is Greg Abel quite able to keep Berkshire investors calm about the future? Well, joining us now to discuss is Steven Check, Check Capital Management president and CIO. Good to have you on the show here. So I want to first start with your takeaways from Berkshire here. I mean, they covered a lot of ground here, US-China, Apple, AI as well, and even a little bit on the bank runs as well. But I want to first get your takeaways as well.

STEVEN CHECK: Well, it was a very uplifting meeting. Remember, this is kind of the first, like, real meeting since COVID, so since '19-- since 2019. And, you know, it's just really good to see the crowd back, not having to do vaccine checks coming through. It just-- and Warren Buffett himself seem just rejuvenated. It's like he almost went back and took a little bit of a speech class or something in the last couple of years. And there was-- the "ums" that were in the meetings the last couple of years just disappeared this year. It was just a really great vibe.

- And we have to talk US-China relations because that's something that, you know, we have commentary on. And when you think of some of the biggest holdings of Berkshire, we mentioned Apple there and really what's at stake here. Do you think that investors are going to heed that, though, and perhaps some of the powers that be in regulation would perhaps listen to this?

STEVEN CHECK: Well, I hope they would. You know, they try to say it generally, pretty diplomatically, Warren Buffett and Charlie Munger. With Charlie Munger, it's very-- very straight out there in what he believes. But this is very common sense type of stuff that they're usually talking about, and they try to put it in a way where it doesn't become politicized and people do listen to it. So I would hope so.

- And, of course, when you talk about Apple, then, also looking at the comparison with autos, we know that Berkshire was very hot on BYD, but then ended up selling half of its stake in the EV maker. As we try and sort go through the tea leaves here, what should we take from that?

STEVEN CHECK: Yeah. Well, they in general, don't like real capital-intensive businesses, where there's a high risk of who's going to be the winner. And they, of course, stated that clearly. And they behaved that way. BYD, I would say, is a bit of an exception.

They-- Charlie Munger, especially, was just enamored with the CEO BYD and what he's done over the years. And it's been just-- it was a huge home run investment for Berkshire. So it certainly is something that worked out very well. But in general, they're not betting on car companies. I think, in this case, they were more or less betting on the CEO of a car company.

- And of course, Berkshire does have its favorite child in Apple. But even when you look at the rest of the portfolio, especially Geico and the turnaround story there, how surprising was that?

STEVEN CHECK: Well, Geico-- Geico was a nice turn, at least from the numbers. But things haven't completely turned at Geico. And it was really kind of refreshing to hear from not just Charlie Munger and Warren Buffett this weekend. We also heard from Ajit Jain about Geico. And he was very candid about the issues that still exist at Geico and hope to be kind of cleaned up maybe in another year and a half. So while Geico's a combined ratio look good this quarter, he did project that it's going to not be that good throughout the rest of this year. And they're just working their way back from kind of a little bit of a hole, technologically wise, that they got themselves into.

- And of course, we knew that the issue of succession would come up. I mean, we didn't hear a lot from Greg Abel and Ajit Jain. But I mean, we did hear more from them than we usually do at the meetings. Talk about that dynamic. We heard Warren Buffett say, you know, Greg Abel is going to be the man. But when they talked about this sort of bench of executives that could follow after them, he sort of dismissed that he called it baloney because there's a very specialized set of skills that you need to be able to run a company the size of Berkshire.

STEVEN CHECK: Well, something that you didn't see, unless you were at the meeting, was there's a movie that takes place before really the questions-and-answer period starts. And-- and in this movie, which lasts for about 20 minutes, they interspersed nine different clips of people asking questions about succession at Berkshire Hathaway. And these clips went back to 1994, 1995, 1996, early 2000s, and early 2010s.

It's the same question, you know, what happens after, Warren Buffett, you're gone? And what's the risk and all that? And it's the same answer for nearly 30 years now. I mean, Berkshire Hathaway has a very deep culture, with a very huge number of talented managers. And they'd really just said, you know, it'll be-- it could be on autopilot for the next three or four years after Warren Buffett departs the scenes, and hardly anyone would notice.

Now, Greg Abel is a very able man. And one of his main jobs will be capital allocation. And you can look at what he did, frankly, with his own money just in the last year. He bought Berkshire Hathaway stock, about $100 million of Berkshire Hathaway stock, with his own money. And he bought it at very succinct times last year when the stock was down around 275. And a little-- just about a month ago, it was just a little under 300. And now we're close to 330.

He really picked some great points with his own personal money. And when he's in charge of Berkshire's money and looking at stock buybacks for Berkshire, for example, that's a big capital allocation decision. I'm sure he's going to do a great job.

- And you know we'll all be watching closely. A big thank you there to Steven Check, Check Capital Management president and CIO. Thank you for your time this morning.