BRK.A Berkshire Hathaway Inc

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.