Warren Buffett: Questions for Sage of Omaha

Is age finally catching up with him, and is Berkshire Hathaway now just too big? That’s what the throng of fans at today’s ‘Woodstock for capitalists’ will be asking

Thousands of people will file into the giant CenturyLink convention centre and sports arena in the city of Omaha, Nebraska, today. Usually the venue for basketball tournaments, baseball games or concerts  – Justin Bieber is due to perform there in July – it is this weekend playing host to a very different spectacle: the annual meeting of a large corporation.

But the men and women packing the seats this afternoon could probably rival the teenage “Beliebers” who idolise the Canadian pop star with their devotion to the company and to the man who over the past half century has transformed what was a dying textile business into a mega-conglomerate with more than 50 subsidiaries.

The man in question is Warren Buffett, whose stewardship of Omaha-based Berkshire Hathaway has made him the world’s fourth-richest man, with a net worth of $53.5bn (£34.5bn), according to Forbes magazine.

His success in enriching himself and those who backed him by buying Berkshire shares has made him an international business figure, and the highlight of the annual meeting is a question-and-answer session where the man and his longtime number two, Berkshire vice-chairman Charlie Munger, field questions submitted by shareholders.

Selecting the questions will be three American financial journalists. A second panel of two analysts and a hedge fund trader called Doug Kass, who is bearish about Berkshire’s prospects, will also be on hand to quiz Mr Buffett and Mr Munger.

Products made by various Berkshire companies will, meanwhile, be on sale in the 194,300 sq ft hall next to the meeting area. At last year’s meeting, shareholders snapped up 1,090 pairs of footwear produced by Berkshire-owned Justin Boots in the span of nine hours. They also bought more than 10,000lbs of sweets produced by See’s Candies, another Berkshire business.

If it all sounds like a bit of show, it is. While Mr Buffett is often called the Sage of Omaha for his investing nous, the meeting has been likened to a sort of Woodstock for capitalists.

But there is a serious side, given the financial stakes involved. Two questions, in particular, are set to dominate this year’s meeting. The first has to do with Berkshire’s size, and whether it is becoming too big – with investments in everything from railroads and insurance to large stakes in companies like Coca-Cola and Wells Fargo – to generate the kind of share-price returns that shareholders have become accustomed to over the years.

And the second has to do with succession, a topic that keeps coming up, given the advancing years of both Mr Buffett, who is 82, and Mr Munger, who is 89.

Mr Kass, who runs the Seabreeze Partners hedge fund, raised the issue of size in 2011 when Berkshire announced that it was investing more than $10bn in IBM. At the time, he was quoted by The Wall Street Journal as saying that while he continued to “worship at the altar of Warren Buffett,” the IBM deal was a reflection of the fact that, as Berkshire became bigger and bigger with a market value back then of close to $190bn, “larger deals are needed to move the needle”.

Earlier this year, Mr Buffett himself lamented his “inability to make a major acquisition” in 2012. “I pursued a couple of elephants, but came up empty-handed,” he wrote in a letter to shareholders.

In terms of performance, 2012 was, as he put it, “subpar”. “For the ninth time in 48 years, Berkshire’s percentage increase in book value was less than the S&P’s percentage gain,” he noted, adding: “To date, we’ve never had a five-year period of underperformance, having managed 43 times to surpass the S&P over such a stretch … But the S&P has now had gains in each of the last four years, outpacing us over that period. If the market continues to advance in 2012, our streak of five-year wins will end.”

This year has begun more positively, with Mr Buffett bagging a very large elephant called Heinz, which Berkshire bought for more than $23bn in a joint bid with the investment firm 3G Capital. But there are only so many blockbuster deals to be done.

Mr Buffett, for his part, remains focused on his long-standing yardstick. “It’s our job to increase intrinsic business value – for which we use book value as a significantly understated proxy – at a faster rate than the market gains of the S&P. If we do so, Berkshire’s share price, though unpredictable from year to year, will itself outpace the S&P over time,” he wrote in his letter.

On the succession question, while Berkshire does have a plan in place, the identity of Mr Buffett’s successor as chief executive has been kept under wraps (when he eventually leaves, the company is likely to appoint his son Howard, currently a director, as non-executive chairman, while the investment managers Todd Combs and Ted Weschler are likely to continue overseeing the company’s many investments).

The secrecy has led to much speculation about who the next boss might be. Last year, in his letter to shareholders about the company’s performance in 2011, Mr Buffett said only that the board was enthusiastic about “my successor as CEO, an individual whom they have had a great deal of exposure to and whose managerial and human qualities they admire”. He added that “we have two superb back-up candidates as well”.

Among those seen as possible runners are Ajit Jain, who runs Berkshire’s reinsurance division. He is widely considered the leading candidate to replace Mr Buffett. Another possible CEO is Matt Rose, who runs Berkshire’s Burlington Northern Santa Fe railroad. Thus far, Mr Buffett hasn’t given much away about when he might leave. Everyone will be listening to see if he drops any hints today.

Tweet success: Buffett makes twitter debut

Warren Buffett’s fame was underlined when he joined Twitter and accumulated hundreds of thousands of followers within a few hours. According to one estimate, he was accumulating followers at a rate of roughly 1,000 per minute when he signed up on Thursday. By yesterday, the Berkshire Hathaway chief had around 300,000 followers. “Warren is in the house,” was his first tweet. The second linked to an essay he wrote for Fortune magazine on “why women are key to America’s prosperity”. Among those who welcomed the Omaha native’s arrival on the social platform was former US President Bill Clinton, who tweeted: “@WarrenBuffett Welcome to @Twitter. What took you so long?”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Business Development Executive - Affiliates & Partnerships

£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Day In a Page

No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor