Jonathan Stempel and Ko Gui Qing
OMAHA, Neb. (Reuters) – Warren Buffett will be the center of attention at Berkshire Hathaway’s (NYSE:) annual meeting on Saturday, but someone who won’t be there – his powerful pal Charlie Munger – will loom large.
The meeting was Buffett’s 60th since taking over Berkshire in 1965 and the first since his longtime friend, business partner and adversary Munger died at age 99 in November. His absence has refocused shareholders’ attention on how the company will evolve once Buffett is no longer at the helm.
Buffett, 93, whose legendary investing acumen earned him the nickname “The Oracle” of Omaha, has largely stopped appearing publicly to discuss the company. He told investors in November that he felt fine but knew he was “playing extra innings.”
“Warren will have a hard time without Charlie,” said Paul Lountzis, president of Lountzis Asset Management. He is attending his 32nd meeting in Berkshire, part of a weekend Buffett called “Woodstock for capitalists.”
Anecdotes and exchanges between Buffett and Munger have been highlights of past meetings. Munger was known for his succinct and sharp responses to Buffett’s often lengthy assessments of Berkshire, the economy, Wall Street and life.
At the arena in downtown Omaha, Buffett and Vice Chairman Greg Abel, 61, will answer questions for about five hours.
Vice President Ajit Jain, 72, who heads Berkshire’s insurance operations, will also join. Abel, who oversees Berkshire’s non-insurance business, was named to succeed Buffett as CEO in 2021.
Investors want to know how Berkshire will tackle challenges such as figuring out how to grow without overpaying for acquisitions, whether to pay a dividend and how to use its $167.6 billion in cash.
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“Buffett says it’s hard to move the way we’re used to right now,” said Ted Bridges, chief executive of Bridges Trust in Omaha, which manages $10 billion in investments, including Berkshire shares. “It would be interesting to hear how we are going to allocate capital and think about the next 10 years.”
Buffett acknowledged the limitations imposed by Berkshire’s size.
The conglomerate, valued at $867 billion, owns dozens of businesses, including the BNSF railroad, Geico auto insurance, Dairy Queen and Fruit of the Loom. He also owns more than $300 billion worth of shares, almost half of which belongs to Apple (NASDAQ:).
“We do not have the ability to produce eye-popping results,” Buffett said in his February letter to shareholders.
CONTINUITY IS THE MAIN THING
Shareholders are looking for certainty about Berkshire’s future.
“I want to see Warren’s energy,” said Steven Check, president of Check Capital Management in Costa Mesa, Calif., at his 27th meeting.
When Buffett is no longer at the helm, his eldest son Howard is expected to become non-executive chairman to preserve the culture.
At that point, Todd Combs, 53, and Ted Weschler, 61, who oversee some of Berkshire’s stock investments, could expand their roles.
“It’s good to have Greg and Ajit up front. It wouldn’t hurt to have Todd or Ted up front too,” Check said.
During Saturday’s questioning, executives may be asked how the Federal Reserve’s fight to reduce inflation affects Berkshire’s consumer-facing operations.
Buffett could discuss investments in Apple, Occidental Petroleum (NYSE:) and five Japanese trading houses, and whether lawsuits against PacifiCorp over wildfire liability have permanently damaged the Oregon utility’s prospects.
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He can also discuss Berkshire’s difficulties with large acquisitions, although holding high-yield U.S. Treasuries helps Berkshire leverage its cash.
“The fact that these guys were able to make 5-1/2% risk-free at the short end of the curve suggests there’s a lot of unsavory stuff out there,” said Cole Smead, chief executive of Smead Capital Management in Phoenix.
ITEMS FOR SALE
Berkshire will report first-quarter results early Saturday morning, with analysts expecting operating profit to exceed $9 billion.
Berkshire will later consider six shareholder proposals that Buffett opposes on topics including climate, diversity and China.
The weekend will feature investment conferences, private meetings and shopping for merchandise from Berkshire-owned companies, including Berkshire T-shirts and Squishmallows toys.
Shareholders may notice another change.
For years, The Bookworm in Omaha sold 25 to 30 Berkshire-endorsed titles about the company, Buffett and investing, as well as titles that Buffett liked.
One book will be sold this year: Charlie Munger’s anthology Poor Charlie’s Almanac.