Berkshire Hathaway Inc shareholders on Saturday celebrated Berkshire chairman and chief executive officer Warren Buffett’s 50th anniversary running the conglomerate, as the billionaire expressed optimism the company would thrive over the long term, even after he has gone.
Buffett and Berkshire Hathaway vice chairman 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 feel this year, with one of the more than 40,000 people that were expected to attend shouting out “Warren and Charlie, we love you” at the start of the main event of what Buffett calls “Woodstock for capitalists.”
Photo: Bloomberg
“It’s not Disneyland, it’s Warrenland,” Wedgewood Partners Inc chief investment officer David Rolfe said.
Berkshire holds more than 80 companies including the railroad Burlington Northern Santa Fe LLC, car insurer Geico Corp, paint supplier Benjamin Moore and Co Inc, ice cream firm Dairy Queen Inc, garment manufacturer Fruit of the Loom Inc, See’s Candies Inc and owns more than US$115 billion of stocks.
Its breadth and depth, which includes US$63.7 billion in cash, has given Berkshire a strong balance sheet that Buffett said would help it thrive should the economy, propped up by low interest rates that many expect to rise soon, head south.
Photo: Bloomberg
“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.”
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 officer.
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 said.
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 [Burlington Northern chairman] Matt Rose and [Burlington Northern chief executive officer] Carl Ice for their really extraordinary performance,” he said.
Rose, considered by some a potential candidate for Berkshire chief executive officer, was not mentioned by Buffett in his annual letter, which led some to believe his standing had been lowered.
Other potential candidates for Berkshire chief executive officer include Berkshire Hathaway Reinsurance Division chief executive officer Ajit Jain, whose decision to join Berkshire three decades ago was hailed by Buffett as was one of the “luckiest” events he experienced, and Berkshire Hathaway Energy chief executive officer Gregory Abel, who answered a question on renewable energy.
New York-based Spencer Capital Management LLC founder Ken Shubin Stein said the idea a chief executive officer 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.
However, 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 marvelous businesses,” 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.”
Buffett also defended Berkshire’s Clayton Homes manufactured homes unit, which was criticized 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.
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