BRK.A Berkshire Hathaway Inc

By Nicole Friedman 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 6, 2019).

OMAHA, Neb. -- The two men most likely to succeed Warren Buffett as chief executive of Berkshire Hathaway Inc. took their turns in the spotlight at the company's annual meeting Saturday.

Mr. Buffett turned over some questions about Berkshire's business operations to his two lieutenants, Ajit Jain and Greg Abel, in a sign of their growing influence at the firm. Both men rarely speak publicly, but shareholders have increasingly asked to hear from them more.

The future of Berkshire after Mr. Buffett's death has long been hotly debated in the business world. The 88-year-old Mr. Buffett built the conglomerate and investing giant over more than five decades into one of the world's biggest companies.

Berkshire has generated massive returns for its shareholders in its history. 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 and Berkshire Vice Chairman Charlie Munger assured shareholders Saturday during an hourslong question-and-answer session that the company's future was in good hands.

"I don't know whether we'll outperform the S&P 500 or not. I know we'll behave with our shareholders' money exactly as we would behave with our own money," Mr. Buffett said. "You cannot have two better operating managers than Greg and Ajit."

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. Messrs. Jain and Abel were promoted to vice chairmen in early 2018, and one of them will take on the CEO job in the future. Mr. Jain oversees Berkshire's day-to-day insurance operations, and Mr. Abel manages the company's noninsurance businesses.

Mr. Jain answered questions Saturday about Berkshire's insurance underwriting and how its Geico unit compares to its top competitor, Progressive Corp. Mr. Abel discussed the energy business's future investments and customer satisfaction at its utility in Nevada. Their comments were greeted with applause.

Underwriting insurance for unusual risks is "more of an art than a science," Mr. Jain said.

Messrs. Abel and Jain might join Messrs. Buffett and Munger on stage at the annual meeting in future years, Mr. Buffett said.

Mr. Buffett defended Berkshire's record, saying that it is still difficult to find ways to invest its $114 billion in cash but that he is pleased with the company's recent deals.

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, after Bank of America Chief Executive Brian Moynihan made the initial outreach to Berkshire on Occidental's behalf.

"If somebody wants a lot of certain money for a deal, they've seen I can get a call on Friday afternoon, they make a date with me on Saturday and by Sunday it's done," he said. "They absolutely know we have $10 billion and we're not going to tell them how to structure their transaction and do anything else."

Mr. Buffett also stood behind Kraft Heinz Inc., one of its biggest investments, despite recent problems at the company. 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 said Saturday it swung to a first-quarter profit, thanks in part to higher insurance-investment income.

But Berkshire's earnings excluded its share of earnings from its 27% stake in Kraft Heinz, because Kraft Heinz hasn't yet filed its earnings with the Securities and Exchange Commission.

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. It 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, echoing Mr. Buffett.

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 money-making machine. Insurance brings in billions of dollars of "float," or upfront premiums that 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 06, 2019 02:47 ET (06:47 GMT)

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