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No rest for Warren Buffett even after 50 years at Berkshire
BERKSHIRE Hathaway Inc shareholders has celebrated Warren Buffett's 50th anniversary of running the conglomerate, as the billionaire expressed optimism the company would thrive over the long haul, even after he is gone.
Mr Buffett and his second-in-command, Charlie Munger, fielded five hours of questions from shareholders, analysts and journalists at Berkshire's annual meeting, including some that criticised the business practices of firms that Berkshire owns or works with, such as Brazil's 3G Capital.
The meeting on Saturday had a more festive air this year, with one of the more than 40,000 people who attended shouting out "Warren and Charlie, we love you" at the start of the main event of what Mr Buffett calls "Woodstock for Capitalists".
"It's not Disneyland, it's Warrenland," said David Rolfe, chief investment officer of Wedgewood Partners Inc.
Berkshire holds more than 80 companies including the Burlington Northern railroad, Geico car insurance, Benjamin Moore paint, Dairy Queen ice cream, Fruit of the Loom underwear, and See's candies, and owns more than US$115 billion of stocks.
Its breadth and depth, which includes US$63.7 billion of cash, has given Berkshire a strong balance sheet that Mr Buffett said will help it thrive should the economy, propped up by low interest rates that many expect to rise soon, heads south. "We will be very willing to act if economic turbulence of any kind occurs, and will be prepared, and most people won't be," he said.
He gave no hints about who would succeed him. He also alluded in one answer to his writing another of his popular letters to shareholders next February, suggesting no intention to leave soon. Yet he said that he would not want someone whose sole background is in investments to become chief executive. "I would not want to put someone in charge of Berkshire with only investing experience and not any operational experience."
Mr Buffett also offered ringing praise for the turnaround at Burlington Northern, Berkshire's largest non-insurance unit, which was plagued last year by service delays. "The improvement has been huge, and I want to thank Matt Rose and Carl Ice for their really extraordinary performance," he said, referring to the railroad's executive chairman and chief executive.
Mr Rose, considered by some a potential Berkshire CEO candidate, was not mentioned by Mr Buffett in his annual letter, which led some to believe his standing had been lowered.
Other potential CEO candidates include insurance executive Ajit Jain, whose decision to join Berkshire three decades ago was hailed by Mr Buffett as one of the "luckiest" events he experienced, and Berkshire Hathaway Energy chief Gregory Abel, who talked at the meeting about renewable energy. He was the only person other than Mr Buffett and Mr Munger to field a question.
Ken Shubin Stein, founder of Spencer Capital Management LLC in New York, said that having a CEO with an operational background "makes sense since the CEO needs to work with the investment team and understand their use of capital for investments, versus using the capital for investing in acquisitions". As is usually the case, no major controversy has been hanging over Berkshire.
But Mr Buffett did get two questions that led him to praise 3G Capital, which critics say ruthlessly cuts jobs at companies it acquires. In 2013, Berkshire and 3G bought HJ Heinz Co, which is now buying Kraft Foods Group Inc. "The 3G people have been successful in building marvellous businesses," Mr Buffett said. "I don't know of any company that has a policy that says we're going to have a lot more people than they need."
Mr Buffett also defended Berkshire's Clayton Homes manufactured homes unit, which was criticised in a recent article in The Seattle Times for predatory sales practices that can trap low-income borrowers in homes they cannot afford. "I make no apologies whatsoever for Clayton's lending terms," he said, adding that Clayton itself faces losses when borrowers default.
Mr Buffett also said that he expects a contentious contract dispute between Berkshire's luxury aircraft unit NetJets and its pilots to be resolved, and said that he had "no anti-union agenda whatsoever". Some of the pilots picketed outside the meeting. REUTERS