Warren Buffett Weekend
Monday, May 07, 2007
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SUZANNE PRATT: A nice performance for Berkshire Hathaway shares today, rising $1,240 or just over 1 percent. Investors embraced the company's solid quarterly earnings reported late Friday and upbeat comments over the weekend from Chairman Warren Buffett. At Berkshire's annual meeting in Nebraska, the so-called "Oracle of Omaha" talked about the outlook for the company and a variety of other issues. Susie Gharib reports from Omaha.
GHARIB: It was a Warren Buffett weekend. He sang and played the ukulele. He stopped to buy his favorite orange popsicle.
WARREN BUFFETT, CHAIRMAN & CEO BERKSHIRE HATHAWAY: You haven't raised the price have you?
GHARIB: He even found time for a game of bridge with his buddy Bill Gates. But no matter where he went, he was always surrounded by adoring shareholders looking to shake hands with the legendary investor. 27,000 shareholders of Berkshire Hathaway came to hear the Oracle of Omaha at the company's three-day get- together that was more like a festival than an annual meeting. But the main event that Buffet calls Woodstock for capitalists, was an all day shareholder meeting. Some people waited all night in the rain for a good seat inside the Qwest convention center. They came for many reasons.
UNIDENTIFIED MALE: I learn a lot from just listening to Warren.
UNIDENTIFIED FEMALE: I wanted to experience this in my lifetime.
UNIDENTIFIED MALE: I wanted to see Warren Buffett while he was still alive.
GHARIB The meeting was closed to cameras. But Buffett answered a wide range of questions. On sub-prime mortgages, they won't hurt the economy. On private equity takeovers, the merger frenzy will continue. On executive compensation, it's still too high. And in an unusual move, Buffett allowed 45 minutes of discussion on Berkshire's controversial investment in Petro- China, the Chinese oil company.
Critics took out newspaper ads ahead of the meeting urging Buffett to sell the stake because the company indirectly provides financial support for the genocide in Darfur. Still, shareholders, including Buffett, overwhelmingly defeated the proposal. But the big question on everyone's mind was who will run Berkshire after Warren Buffett is gone? Chris Davis, whose Davis advisors fund owns a large stake of Berkshire stock, says it won't be easy to fill Buffett's big shoes.
CHRIS DAVIS, PORTFOLIO MANAGER, DAVIS ADVISORS: Warren Buffett is irreplaceable. And an important part of the return over time at Berkshire has been Warren's ability to allocate capital at very high returns. And no matter who he gets to succeed him, it's a very very low probability that they will be as good.
Suzie: Buffett, now 76, shows no signs of slowing down. He says he feels terrific and has no plans to retire. But he has given Berkshire's board the names of three people within the company capable of doing his job. Speculation is that the candidates include Tony Nicely, who runs auto insurer Geico, David Sokol, CEO of Mid-American Energy, Richard Santulli, head of NetJets and Ajit Jain from Berkshire's reinsurance unit. The other management mystery is who's going to take over as Berkshire's chief investment officer. Right now Buffett and Lou Simpson, co-CEO of Geico run the company's huge portfolio of investments which includes Coca-Cola and American Express.
BUFFETT: It's not quite "American Idol." But at the moment we are, we've got maybe 600 or 700 applications of one sort or another. Shortly after this meeting, I'm going to go through those and narrow it down to 30 or 40 and then try to narrow it down to three or four. And I hope by this time next year that I have one or more people that will be possibilities for succeeding me in that position.
GHARIB: Succession is such a big worry, because investors think only Buffett has the magic touch when it comes to acquisitions. Successful brand names like Dairy Queen, Geico and Fruit of the Loom are among the 70 or so companies that Buffett has bought over the past four decades. Berkshire has $43 billion in cash, a concern for some investors who want to make sure that huge sum is invested wisely. For now Buffett says he's looking for jumbo size acquisitions.
BUFFETT: I'm out there stalking these elephants but they're hard to find and there's a lot of competition for the elephants these days. We need big businesses to move the needle at Berkshire. We have $160or $70 billion in market value, so if we're going to increase that at a reasonable clip, we can't do it by buying lemonade stands.
GHARIB: He says the world is on his radar and he's looking for deals outside the U.S. Last summer he made his first international acquisition, Iscar, an Israeli machine tool company.
BUFFETT: We will comb the globe and we would love to make large deals outside the United States. And I think we have a better chance of doing that than we did a few years ago.
GHARIB: Shares of Berkshire class "A" have been struggling because of the uncertainty surrounding the future of Buffett and his company. The stock has been in a narrow trading range so far this year after rising 50 percent over the previous five years. Morningstar analyst Justin Fuller rates Berkshire's "A" shares a "strong buy" and believes they are worth $141,000.
JUSTIN FULLER, FINANCIAL SERVICES ANALYST, MORNINGSTAR: A lot of people aren't giving the company credit for Mr. Buffett being here today. I think that the culture and both the model he's built here is going to give whoever takes over for him eventually really a head start on his competitors.
GHARIB: Some investors point out that Berkshire's shares would get a boost if the company would split the stock, pay a dividend or buys back shares. But those are things that Buffett doesn't believe in. And for now he's still calling the shots. Susie Gharib, NIGHTLY BUSINESS REPORT, Omaha, Nebraska.
