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Buffett celebrates 50th year at Berkshire
[OMAHA, Nebraska] Berkshire Hathaway Inc shareholders on Saturday celebrated Warren Buffett's 50th anniversary running the conglomerate, as the billionaire expressed optimism the company would thrive over the long haul, even after he's gone.
Mr Buffett and his second-in-command Charlie Munger fielded hours of questions from shareholders, analysts and journalists at Berkshire's annual meeting, including some that leaned toward the business practices of firms that Berkshire owns or works with, such as Brazil's 3G Capital.
The meeting had a more festive air this year, with one of the more than 40,000 people expected to attend 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.
It's 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 denied that Berkshire needed special oversight by having become too big to fail.
Mr Buffett gave no hints about who would succeed him, though he said he would not want someone whose sole background is in investments to become chief executive.
Mr Buffett said experience in operations is very important. "I would not want to put someone in charge of Berkshire with only investing experience and not any operational experience," he added.
He 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 candidates for the CEO job include insurance executive Ajit Jain, whose decision to join Berkshire three decades ago was hailed by Mr Buffett as was one of the "luckiest"events he experienced, and Berkshire Hathaway Energy chief Gregory Abel, who answered a question over renewable energy.
Ken Shubin Stein, founder of Spencer Capital Management LLC in New York, said the idea a CEO should have 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 H.J. Heinz Co, which is now buying Kraft Foods Group Inc. "The 3G people have been successful in building marvelous 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 Seattle Times article 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.
Berkshire's annual meeting is Omaha's top annual draw other than baseball's College World Series - reflected in hotel rooms that can fetch more than US$400 a night and often sell out nearly a year in advance.
Devoted and sleep-deprived shareholders began lining up outside the venue hours before doors opened at 7 am (CDT).
Kyle Cleeton, a research analyst for an investment firm, may have gotten there first, saying he showed up at 10 pm the night before. "I wanted to be first in line," he said. "You're not sure how many more years you're going to have." Bill Guenther, a state forester from Brattleboro, Vermont, said, "I'm one who likes a good seat." He arrived at 1:04 am despite having last year suffered a major foot injury when he collided with another shareholder as he tried to get that good seat. "My girlfriend said, 'You're not going to do this again,'and I said, 'I have to, it's the 50th year.'"