Some of us from Generation X or Generation Y may remember the Walt Disney cartoon series that aired every weekend named Looney Tunes. This series was masterfully created in vivid detail using thousands of drawings for each weekly episode. What was perhaps most amazing about these entirely entertaining cartoons is that ALL of the voices were recorded by one person. Mel Blanc was often referred to as “the man of one thousand voices” for his ability to portray almost any character during the golden age of Hollywood. One of Mel’s most dynamic assignments was to bring rifle-toting Elmer Fudd to life as he pursued Daffy Duck and Bugs Bunny for a little sport shooting. Watch HERE.
My late father used to hunt ducks with my grandfather when they lived down in Essex, CT. It was one of their favorite activities during the late fall and early winter as they climbed into their duck boats and paddled through Middle Cove and around Knot Island. My late mother lovingly remarked that when she met my late father, everything he owned was the color of duck boat brown. I am no hunter. I don't even own a shotgun. But, I do know that one of the most important traits in waiting for something good to fly by your perch is PATIENCE - and warm clothes! Special note: No birds were harmed in writing this blog.
Easter or Passover (whichever one you celebrate) are now behind us and each day is getting brighter as we march through spring toward summer. Churchgoers are reminded that the light of Christ brings new hope of eternal life. What is it that connects a humble rabbit with a glorious religious holiday? Where did the idea of hiding Easter eggs come from? Do kids eventually make the connection between candy and reincarnation? These are all questions for another time, place, and person.
My quick take, however, on this whole matter is that rabbits are so quiet and agile that they tend to pop up when and where you least expect them. They can lumber along grazing on their favorite snack, or they can bolt off with amazing acceleration to escape a predator. Eggs produce chicks who grow into chickens. To me, they represent new life and new beginnings. The frailty of life is present in each beautiful egg and kids have a strong incentive to find them before they start to smell bad on Easter Monday. Finally, rabbits stereotypically favorite food is carrots (they actually only like the green carrot tops). Carrots take a LONG time to grow. Again, we return to that P word - patience.
The moral of the story is that life really is like a box of chocolates. We never know what we are going to get. That is what makes it so interesting to me. We are out here on this little blue ball with so much uncertainty clouding events in the short run. But, the long term events have a certain rhythm or pattern to them. Animal lovers in the northeast will rejoice that we are well past duck season. Rabbit season has come and gone. We are now firmly into proxy season.
Shareholders of individual stocks listed on US exchanges have their own private holiday in the spring. Much like the pre-holiday runup before Christmas and Hannakuh, US mailboxes are now flooded with bulky magazine shaped booklets. It is proxy season! A proxy represents an invitation to vote on the policy actions about to be taken by a company whose stock you own. These actions can be as mundane as rehiring the reputable accounting firm that has been auditing the company financial statements for each of the last gazillion years. Or, they could be as controversial as a complete restructuring of executive compensation.
The traditional materials that accompany a proxy statement in the mail are the most recent annual report, the proxy statement itself, and a voting form tied to your shareholder ID. The proxy statement describes the voting topics with all underlying descriptions that may be pertinent to each topic. These typically include voting to retain the current members of the Board Of Directors or attract new blood. They can also include actions proposed by a shareholder that have received enough sponsors to warrant a formal vote by ALL common shareholders. Common shareholders are allotted one vote per share owned - so it is possible to “stuff” the ballot box. The internet has made it much easier to vote using a secure PIN for most proxy invitations.
The annual report is another important piece of information included in the proxy package. I just received the physical mailing for The Progressive Corporation (one of our current portfolio holdings). This contained three items: the 52 page annual report printed in color on beautiful paper focusing on all the great things that happened over the past year, the 68 page proxy statement, the 78 page regulatory version of the annual report to shareholders (AKA Form 10-K), and the 1 page voting form. In contrast to the stunning annual report, the proxy statement and Form 10-K are printed on the cheapest - yet still durable - paper available.
Running a publicly traded company is expensive and shareholders are often (in non-COVID years) given the opportunity to vote their shares in person at the company annual meeting. One such annual meeting is sometimes called the “Woodstock” of investor meetings because it attracts so many zealous shareholders. This - of course - is the annual event for Berkshire Hathaway run by Warren Buffet and his sidekick, Charlie Munger. At ages 90 and 97, these two legendary investors are certainly no “spring chickens” and their followers listen to the annual meeting presentation with bated breath. The event this year will occur on May 1st and broadcast from Los Angeles in an effort to reduce travel risks for Charlie.
Annual reports are a veritable gold mine of information about the past triumphs, current operations, and future risks facing a publicly traded company. For the trained eye, they are the primary source of fundamental information that can have a material impact on the share price of the stock. The layperson may find them best used for bedtime reading in order to conquer persistent insomnia. For large companies like Berkshire Hathaway, they also provide a useful summary for their industry, sector, and markets in general.
The best part of the way Warren and Charlie communicate their story to the shareholders is their down to earth approach. The first draft of the annual letter is usually addressed to Doris and Bertie - the two Buffett sisters in very plain language. He does this so that there is no temptation to litter the letter with industry jargon. It also makes the 15 page (this year) introduction both accessible and timeless. To hear the words from the “Oracle Of Omaha” himself simply read MORE!
My favorite holding period is forever. - Warren Buffett