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Berkshire Hathaway's Annual Shareholders Meeting: Reports

Berkshire Hathaway's Annual Shareholders Meeting: Reports
5/3/2009 3:35 AM ET

Berkshire Hathaway Inc.'s (BRKa: Quote) annual shareholders' meeting on Saturday, was a potpourri of the expected and unexpected as chairman, Warren Buffet, and vice-chairman, Charles Munger, answered investor queries. This year's convention held, however, had one major difference from past years - questions were pre-screened by reporters to avoid personal questions such as Buffet's relationship with Jesus Christ and his views on baseball, which were asked in previous meetings.

According to diverse reports, Buffet, 78, chaired the session with many quotable aphorisms, opinions and perspectives, and even provided a preliminary overview of the company's performance in the first quarter. The complete results are scheduled to release next week.

Concerns regarding who will take over Berkshire Hathaway in case of Buffet's mortality have been ongoing for some time and were the investors' focus at the annual meeting. Buffet did not name any successors for the posts of chief executive officer or CEO and chief investment officer or CIO, but he did indeed talk about their candidacy and their performance.

Berkshire Hathaway's first-quarter operating earnings declined to about $1.7 billion from about $1.9 billion in the year-ago period. Buffet stated that the firm's book value per share fell by 6% over last year, due mainly to the decline in the value of its investments. Gains and losses from derivatives are usually reflected in net income, which was not revealed.

Also known as the 'Oracle of Omaha", Buffet picks stocks that he feels would have value forever. Though his investments are mostly in insurance and in utilities, such companies and other non-insurance operating companies have felt the pinch of the dire economic environment.

An important question that Buffet took on early in the meeting was Moody's recent downgrade of Berkshire to Aa2 from Aaa. Buffet reportedly stated that he did not think the downgrade would materially affect the company.

Berkshire's board has short listed four candidates, both internal and external, for the position of CIO and three internal candidates for the post of CEO. Buffet's son, Howard Buffet, will succeed him as the chairman, and the management of Berkshire, with more than $50 billion portfolio, will be divided between the Chairman, CEO and CIO.

The four potential successors for investment officer failed to beat the 38% fall in the S&P's 500 Index in 2008. Buffet noted that this did not disqualify their candidacy as he did not cover himself "in glory either in 2008".

According to Bloomberg, persons speculated by the media as likely candidates to succeed as the chief executive were David Sokol, chief of MidAmerican Energy Holdings Co., Tony Nicely, head of Berkshire's car insurance business Geico Corp., and Ajit Jain, the executive who runs Berkshire's reinsurance business.

Bill Gates, the co-founder of Microsoft Corp. (MSFT: Quote) and the person who tops Buffet on the Forbes' list of the world's richest men, is one of Berkshire's board members who will choose Buffet's successor.

At the 35,000 investors-packed Qwest Center arena at Omaha, Buffet also addressed his views on financial institution major Wells Fargo & Co. (WFC: Quote). Quotes Bloomberg, "I think I know their future, frankly, better than somebody that comes in to take a look".

Despite Wells Fargo's plunge in stock value, Buffet is reportedly very optimistic about the bank's future. The value investor stated that all banks couldn't be viewed indiscriminately and their performance depended on factors such as varying costs of funding and equity, in which Wells Fargo, Goldman Sachs (GS: Quote) and US Bancorp (USB: Quote) are strong.

According to a CNBC report, Buffet stated that he applies his own "stress test" to Wells Fargo and that it "passes with flying colors." Buffet also noted that Wells Fargo obtained its money, a bank's raw material, much cheaper than anybody else.

Buffet also gave his views on the print media and said he wouldn't buy most of the newspapers in the U.S. at any price. Readers have shifted to paper-free e-news and Buffet sees the possibility of "unending losses" for this sector.

Analyzing the government's bailout and economic plans, Buffet stated the government did need to step in, in light of the current economic environment. Buffet noted that the government would have to eventually pay for the stimulus plans and with little inclination to increase taxes, the value of the dollar might shrink and lead to inflation.

This year's shareholders meeting skipped ending on a dire note as "Alex from Boston", Buffet's grandnephew popped the question to his long-time best friend.

BRKa closed Friday's regular trading session at $92,005.00.

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by RTT Staff Writer

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