Warren Buffett: Know when to hold ’em

Investors awaiting Warren Buffett’s annual letter will get three for the price of one this year. The founder of Berkshire Hathaway is planning a special “golden anniversary” publication, marking 50 years since he took a controlling stake in the company.

Mr Buffett and his business partner, Charlie Munger, are independently writing their views of Berkshire’s extraordinary journey during the past five decades — and what they expect for the next five. Neither is changing a word of the other’s commentary. Readers will be able to compare the two sets of reflections and predictions, in addition to the regular annual letter.

By writing about the next 50 years, the two men, who have a combined age of 175, will be attempting to shape the future of Berkshire — and their legacy — amid an intensifying debate about what this unusual company will look like when they are gone. They took an ailing New England textile business and turned it into one of the most successful investment vehicles in history, through a combination of acquisitions in insurance and other industries and a portfolio of equity investments in American icons such as Coca-Cola, McDonald’s and American Express. Over the past generation, as shareholders at other companies have demanded a focus on a core business, Berkshire has only diversified more.

Now, with the addition of US power companies, one of North America’s largest railways and a 50 per cent stake in Heinz, it is probably the world’s most diverse conglomerate; it is certainly the largest. With a market value of $358bn, it is bigger than General Electric. As Mr Buffett, 84, the company’s chairman, chief executive and chief investment officer, has aged, the debate about whether the ragbag entity should be split apart after his retirement has only got louder. But the debate may be shifting.

While he and Mr Munger, the 91-year-old vice-chairman, insist that they have built an enduring company with a culture all its own, investors, analysts and long-time Berkshire watchers are focusing on more nuanced questions of management structure. “The most important thing to Warren Buffett is, how can he position Berkshire for the future so that it continues to generate increased value for shareholders,” says Jay Gelb, an analyst who covers the company for Barclays and who is invited each year to pose questions to Mr Buffett at Berkshire’s annual meeting. “I think this could be his most important annual letter yet.”

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