Berkshire’s Annual Meeting: Warren Buffett Talks Stocks and Successors

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Billionaire investor Warren Buffett held court this weekend at Berkshire's annual meeting, fielding dozens of pressing questions about the company, investing strategies, and a new CEO.

Some 40,000 gathered to hear what the leader of the storied Berkshire Hathaway (NYSE: BRK A, BRK B) had to say about the state of the company and its fate following Buffett's recent diagnosis with prostate cancer. The Oracle of Omaha triggers such an enthusiastic investing response the event ends up more like a festival than a shareholders' meeting.

Buffett dismissed the health news as a mere non-event, barely touching on the subject.

The investing legend instead focused on the money.

Buffett on Berkshire

Berkshire posted first-quarter earnings Friday after the close that doubled compared to the same period a year ago, fueled by gains in its insurance, manufacturing, service and retail businesses.

The company reported earnings of $3.25 billion for first quarter 2012, translating to $1,966 per Class A share, versus $1.51 billon in the first quarter of 2011.

Operating income came in light at $1,615 a share. Analysts surveyed by Thomas Reuters had forecast $1,780.

The company also posted gains from its derivates holdings – investments that Buffett once referred to as "financial weapons of mass destruction."

The earnings follow a rare down year in 2011, when Berkshire's shares slumped 4.7%, even while the broader market managed to eke out a gain.

However, over the past 20 years, Berkshire has gained more than thirteen-fold, while the S&P 500 Index is up a measly three-fold.

Buffett made it quite apparent that he sees tremendous growth at Berkshire, most likely through acquisitions. The investing guru disclosed an eye-popping $22 billion deal that he recently wanted to close, and coyly said it might be one that is revisited.

He also said that "he expects to have many hundreds of thousands more employees in the future."

Those who advocate the "Buy America" theme were pleased to hear that Buffett noted most of the additional jobs will be in America, a nod to bringing jobs back to the United States.

Buffett once said, "It's never paid to bet against America. We come through things, but it's not always a smooth ride."

The 81-year of wizard of Wall Street also addressed the pressing question of dividends.

Buffet told CNBC that next year's annual shareholder letter will touch on the topic of a "logical dividend policy" at Berkshire. For now, he maintains there are no current plans to instate a dividend. Many shareholders have become more insistent that Buffet share some of Berkshire's billions in cash as the industry has become more dividend-focused in 2012.

Jeff Matthews, author of "Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett," told The Journal, "I'm not sure why [talk of a dividend] was so prevalent this year, except perhaps the extended period of underperformance in Berkshire comes at a time when the world is still in turmoil and you would think Berkshire would be seen as a safe-haven beneficiary of events."

The multi-billion dollar conglomerate holds stakes in more than 80 companies including Geico, Lubrizol, Burlington Northern Santa Fe (BNSF) and MidAmerican Energy Holdings.

Also held in its extensive portfolio are a plethora of Fortune 500 companies including Bank of America (NYSE: BAC), Kraft Foods (NYSE: KFT), Johnson & Johnson (NYSE: JNJ), Intel (Nasdaq: INTC) and International Business Machines (NYSE: IBM).

Buffett on Stocks

While the financial prophet did divulge that he was adding to positions of two portfolio stocks, he did not mention names.

Buffett however did acknowledge Berkshire opened its cache of cash and shelled out $60 million to buy stocks last Friday, and intended to pick up more today (Monday).

Buffett continued his investing talk Monday with a CNBC interview in which Buffett revealed he is sticking to his tried-and-true method of buying good companies on the dips.

Buffett is fond of saying, "If a business does well, the stock eventually follows."

In Monday's extended interview Buffett restated his support for Wal-Mart Stores (NYSE: WMT) stores, saying the recent scandal over bride payments did not change his opinion of the stock. Berkshire is Wal-Mart's fifth largest shareholder.

The dip in European shares following the unsettling weekend elections in France and Greece was dismissed by Buffett, who said "It's going to be very, very difficult to resolve their problems."

But Buffett insisted the ailing Eurozone countries would eventually do so. The United States, he added in the interview, is on a different path.

Buffett on Successor

While Buffett skirted around the issue of his health, he was only slightly more open about of the most pressing shareholder questions: Who will be Berkshire's next CEO?

Buffett failed to mention names, but he did acknowledge that the new leader of Berkshire will be very conscience of risk, and is as steeped in the company's culture as Buffett himself.

The names tossed around as a possible Buffett CEO replacement include Ajit Jain, the head of the company's reinsurance operations; Tad Montross, chief of the insurance business General Re Corp.; Greg Abel, president and CEO of MidAmerican Energy; Tony Nicely, chief executive of Geico; and Matthew Rose at the Burlington Northern Santé Fe railroad unit.

Buffett previously has reiterated that investment managers Todd Combs and Ted Weschler "will be handling a few billion dollars in 2012, but they have the brains, judgment and character to manager our entire portfolio" when he and Berkshire vice chairman Charlie Munger are no longer running the company, CNN reported.

Saturday's meeting, while fairly typical, did involve some changes to the usual Berkshire format.

Analysts were included in the panel for the first time. Alexander Rubalcava, founder of Rubalcava Capital Management, told The Wall Street Journal the panel added value by asking more specific, direct and insightful questions for shareholders.

Frank Betz, partner at Caret Zane Capital Management in Punta Gorda, Fla., called it the best meeting in years. Betz told The Journal the atmosphere was surprisingly relaxed considering the heightened concerns over the health of Buffett.

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