"There's been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities," Buffett said.
NEBRASKA: Warren Buffett tried to reassure shareholders at the Berkshire Hathaway Inc. annual meeting Saturday that the company’s success would continue once he is no longer at the helm.
Berkshire promoted Mr. Buffett’s two potential successors, Greg Abel and Ajit Jain, to vice chairmen in January and gave them bigger responsibilities overseeing the company’s business units. The managers of Berkshire’s 60-plus business units now report to either Mr. Abel or Mr. Jain, rather than to Mr. Buffett.
Their ascensions, and Mr. Buffett’s eventual exit from the company, have raised some concern about one of the hallmarks of Berkshire’s success: its reputation as buyer of choice for well-run companies. Part of the appeal to those companies is Mr. Buffett’s seal of approval, and some shareholders question whether Berkshire will have the same success acquiring businesses under Mr. Abel or Mr. Jain.
“The reputation belongs to Berkshire now,” Mr. Buffett said. “For somebody that cares about a business. we absolutely are the first call and will continue to be the first call.”
Mr. Buffett said repeatedly at the meeting that Berkshire’s success in acquiring companies and finding attractive investments is because of the company’s balance sheet and track record, not his personal fame. While Mr. Buffett’s lieutenants are well-known to followers of the company, Messrs. Jain and Abel rarely speak publicly.
As for the day-to-day of running Berkshire, the new leadership is so far status quo, Mr. Buffett said.
“Nothing’s really changed that much,” he said, joking that he has been semiretired for decades. Berkshire allows its managers to run their businesses relatively independently.
Mr. Buffett still oversees the firm’s capital allocation. His portfolio managers, Ted Weschler and Todd Combs, manage about $25 billion in stock investments, and Mr. Buffett manages the rest of the company’s stock and bondholdings, and its cash holdings.
Messrs. Combs and Weschler have arranged some deals for Berkshire, Mr. Buffett said, and the heads of Berkshire subsidiaries have long sought out “bolt-on acquisitions” on their own.
The succession questions were a key component Saturday as Mr. Buffett and his business partner, Berkshire Vice Chairman Charles Munger, answered questions from shareholders, analysts and journalists for hours.
The conglomerate runs a large insurance operation as well as a railroad, utilities, industrial manufacturers and retailers. Its holdings include Dairy Queen, Duracell, Fruit of the Loom, Geico and See’s Candies. This year, more than 40,000 people were expected to travel to Omaha for the annual meeting.
In addition, Mr. Buffett again defended Wells Fargo & Co., one of Berkshire’s largest equity holdings, despite a string of scandals at the bank. Some of Berkshire’s best investments have experienced scandals in the past, including American Express Co. and car insurer Geico, he said.
“All the big banks have had troubles of one sort or another,” he said. “And I see no reason why Wells Fargo as a company, from both an investor standpoint and a moral standpoint going forward, is in any way inferior to the other big banks with which it competes.”
Berkshire said Saturday that it swung to a rare loss in the first quarter, hurt by the impact of an accounting rule change on unrealized investment losses. It was the firm’s first quarterly net loss in nine years.
Berkshire reported a first-quarter net loss of $1.14 billion, or $692 per Class A share equivalent, from $4.06 billion, or $2,469 a share, profit in the year-earlier period. Operating earnings, which exclude some investment results, rose to $5.29 billion from $3.56 billion in the year prior.
Mr. Buffett cautioned shareholders in his annual letter, which was released in February, that Berkshire’s earnings would appear more volatile starting in 2018 because of the new accounting rule that companies include unrealized investment gains or losses in their net income. Berkshire reported a $6.2 billion drop in investment income in the first quarter.
Berkshire also holds large investments, especially in the stock market. Mr. Buffett told CNBC on Thursday that Berkshire increased its large stake in Apple Inc. by 75 million shares in the first quarter.
Berkshire’s Class A shares closed Friday at $292,600, down 1.7% for the year.
The 87-year-old Mr. Buffett, whose shrewd investments have earned him the nickname “the Oracle of Omaha,” still has plenty of cash on hand for future acquisitions as a way to drive profit. Berkshire held $108.6 billion in cash at the end of the first quarter, down from $116 billion at the end of 2017.
Despite its burgeoning cash pile, Messrs. Buffett and Munger continued to argue against paying a dividend to shareholders. Berkshire hasn’t paid a dividend in decades. Mr. Buffett said even a one-time special dividend would be “very unlikely,” but he noted that if the firm decided it couldn’t use its capital effectively, it would figure out the best way to return it to shareholders.
Mr. Buffett also said that Berkshire’s project with Amazon.com Inc. and JPMorgan Chase & Co. to lower health-care costs for their employees is making progress, and he hopes a chief executive will be announced within months. - WSJ
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