Warren Buffett tried to allay fears of Berkshire Hathaway Inc shareholders about the company’s future after he was diagnosed with prostate cancer, and revealed that he recently tried to make one of the biggest acquisitions of his storied career.
The question of who will succeed Buffett, 81, as chief executive became more of an imperative after Buffett disclosed the diagnosis on April 17.
While Buffett called it “a really minor event,” his early-stage prostate cancer was a reminder that for all his success as an investor and all the plaudits he gets, Buffett is mortal and would be hard to replace at the company he has run since 1965.
That made the future of Berkshire, with or without Buffett, a central focus of five hours of questions at its annual meeting on Saturday in downtown Omaha, Nebraska.
“I don’t think that every deal that I made would necessarily be makeable by a successor, but they’ll bring other talents,” including skills to be an effective chief risk officer, Buffett said. “We’re not going to have an arts major in charge of Berkshire.”
The annual meeting is the centerpiece of a weekend of events that Buffett has dubbed “Woodstock for Capitalism.” Close to 40,000 shareholders were expected to attend this year.
Buffett on Saturday also said that he recently considered a more than US$20 billion acquisition, and would have sold some Berkshire stock holdings he wanted to keep to get it done.
“I wish we could have made it,” he said. “It could happen. I don’t think it will happen.”
Buffett did not name the target. A takeover of that magnitude would have been close in size to Berkshire’s biggest takeover — the US$26.5 billion purchase of railroad company Burlington Northern Santa Fe in 2010.
It would have also dented Berkshire’s US$37.83 billion cash hoard. Buffett said he wants to keep US$20 billion on hand.
“Ideally we would spend about US$20 billion, that would be about as much as I would feel comfortable spending now,” Buffett said after the meeting ended. “I would settle for about US$10 billion and don’t try me with US$5 [billion].”
Berkshire has about 80 operating units, which sell such things as car insurance, chemicals, clothing, furniture and ice cream.
The meeting took place one day after Berkshire said first-quarter profit more than doubled, as its insurance business was spared the huge losses that natural disasters in Australia, Japan and New Zealand caused a year earlier.
Buffett even said that Berkshire is writing “a lot more” reinsurance in those countries, as well as in Thailand.
He was also upbeat about Berkshire’s prospects, despite slow US economic growth and the inability of the US and other countries to get their fiscal houses in order.
“I would stay away from medium or long-term government bonds, our own or those of other countries,” he said.
Buffett also said that despite his huge investment in International Business Machines Corp (IBM), which topped US$11.7 billion at year end, he would not plunge into other technology giants such as Apple Inc and Google Inc.
“The chances of being way wrong in IBM are probably less, at least for us,” than in Google or Apple, Buffett said.
Though Berkshire shares have lagged broader stock and insurance stock indexes in recent months, shareholder enthusiasm at the meeting does not appear to have flagged.
“[The] stock is a home run over the next five years,” said Bill Smead, chief investment officer of Smead Capital Management in Seattle.
Berkshire did not repurchase shares in the first quarter, and Buffett said he would be comfortable repurchasing stock at a price of 1.1 times book value, and perhaps higher.
Buffett also said Berkshire may buy more newspapers. It owns the Buffalo News, just bought the hometown Omaha World-Herald, and is a longtime shareholder of Washington Post Co.