By Nicole Friedman
Warren Buffett's Berkshire Hathaway Inc. won't change much after
Mr. Buffett is no longer at the helm, he assured shareholders at
the company's annual meeting Saturday.
Berkshire has generated massive returns for its shareholders in
its history. But recent new investments and missteps have raised
concerns among some investors about whether the company has grown
too big to outperform the market in the future. In the past decade,
Berkshire stock has risen 259%, compared with a 314% increase in
the S&P 500 including dividends.
Mr. Buffett said Berkshire is still focused on value investing
and that it is a good idea for shareholders to hear more from the
next generation of Berkshire leaders in the future.
The 88-year-old Mr. Buffett, whose shrewd investments have
earned him the nickname "the Oracle of Omaha," is Berkshire's
chairman, chief executive officer and chief investment officer. Two
of Berkshire's vice chairmen, Greg Abel and Ajit Jain, are
potential successors for the CEO job. Berkshire's two portfolio
managers, Ted Weschler and Todd Combs, are in line to eventually
take over all of the conglomerate's investments.
"You cannot have two better operating managers than Greg and
Ajit," Mr. Buffett said. Of Messrs. Weschler and Combs, he said,
"They are very smart, they are totally committed to Berkshire and
they're very good human beings on top of that."
The statement from Mr. Buffett came as he and Berkshire Vice
Chairman Charlie Munger answered shareholder questions for hours
Saturday in Omaha, Neb.
Messrs. Abel and Jain might join Messrs. Buffett and Munger on
stage at the annual meeting in future years, Mr. Buffett said.
"It's probably a pretty good idea and we've talked about it," he
said. In a sign of their growing influence at the firm, in response
to a question about underwriting unusual insurance risks, Mr.
Buffett asked Mr. Jain to respond.
Mr. Jain oversees Berkshire's day-to-day insurance operations,
and Mr. Abel manages the company's noninsurance businesses.
The two portfolio managers -- Messrs. Weschler and Combs -- have
pushed Berkshire's investments into new areas, including more
technology companies and financial-technology startups. Mr. Buffett
said that one of the two managers recently bought Amazon.com Inc.
shares for Berkshire's portfolio.
As Berkshire has grown, so has its cash pile, and Mr. Buffett
has said it is difficult to find good investments for Berkshire's
$114 billion in cash.
Earlier this week, Berkshire invested $10 billion in Occidental
Petroleum Corp.'s bid to buy Anadarko Petroleum Corp. That deal
came together within days, Mr. Buffett said, and Bank of America
Chief Executive Brian Moynihan made the initial outreach to
Berkshire on Occidental's behalf.
Berkshire said Saturday that it swung to a first-quarter profit,
thanks in part to higher insurance investment income.
Still, Berkshire's earnings excluded its share of earnings from
its 27% stake in Kraft Heinz Inc., because Kraft Heinz hasn't yet
filed its earnings with the Securities and Exchange Commission.
Write downs at Kraft Heinz weighed on Berkshire's performance in
the fourth quarter of 2018.
Berkshire and private-equity firm 3G Capital formed Kraft Heinz
when they merged their H.J. Heinz Co. with Kraft Foods Group Inc.
in 2015. Mr. Buffett said that he overpaid for Kraft in that
deal.
"Kraft Heinz is still doing very well operationally," he said.
But "you can turn any investment into a bad deal by paying too
much."
Berkshire reported first-quarter net earnings of $21.66 billion,
or $13,209 per class A share equivalent, from a loss of $1.14
billion, or $692 a share, in the year-earlier period. Last year's
first-quarter earnings swung to a loss due to unrealized investment
losses.
Operating earnings, which exclude some investment results, rose
to $5.56 billion from $5.29 billion in the year prior.
Berkshire bought back $1.7 billion of its own shares in the
first quarter, the company said. Berkshire changed its buyback
policy last year, and some shareholders have said they would like
the company to spend significantly more cash repurchasing its
stock.
Over time, Berkshire could repurchase $100 billion in shares,
Mr. Buffett said at the meeting.
"I predict we will get more liberal in repurchasing shares," Mr.
Munger said.
The conglomerate runs a large insurance operation as well as
railroad, utilities, industrial manufacturers and retailers. Its
holdings include recognizable names like Dairy Queen, Duracell,
Fruit of the Loom, Geico and See's Candies.
Berkshire's insurance business sits at the core of its
moneymaking machine. Insurance brings in billions of dollars of
"float," upfront premiums customers pay and that Berkshire invests
for its own gain. Berkshire also holds large stock investments,
including in Apple Inc. and Wells Fargo & Co.
Class A shares closed Friday at $327,765, up 7.1% for the
year.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
May 04, 2019 13:35 ET (17:35 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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