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Despite slowing growth, shareholders' faith in Warren Buffett holds strong

At Berkshire Hathaway Inc's annual meeting, investors acknowledged the company's fastest-growing days have probably passed. But shareholders say they are still confident with Warren Buffett and his hand-picked management team at the helm.

By Jonathan Stempel and Jennifer AblanReuters / May 5, 2013

Berkshire Hathaway Chairman Warren Buffett (top l.) gestures to runners at the start of a 5k race sponsored by Brooks Sports Inc., a Berkshire-owned company, in Omaha May 5, a day after the company's annual meeting. Buffett at the meeting gave the most extensive comments to date about the future of Berkshire Hathaway Inc after he is gone, saying he still expects the conglomerate to be a partner of choice for distressed companies.

Rick Wilking/Reuters

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Omaha, Neb.

Short-seller Douglas Kass, Warren Buffett's handpicked bear, raised a concern on the minds of many shareholders at the "Woodstock for capitalists" this weekend: Has Berkshire Hathaway Inc become so big that it will find it hard to grow?

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Many retail investors who converged on Omaha, Nebraska, for Berkshire's annual meeting on Saturday acknowledged that its fastest growth days are likely behind it. But they said Berkshire is still a good long-term bet as faith remains in Buffett and his management team's more than 4-decade-long record of stellar returns, and the company's tentacles into many sectors of the US economy.

"Yes, it is a concern, but I have to get my expectations in line," said Julie Fehrnstrom, a mother of three from Orinda, California, attending her fifth meeting. "They are not driven by short-term decision making and they have really smart management. You really don't always find that."

Sherrie Palmer, a social worker from Portage la Prairie, Manitoba, was attending her first Berkshire meeting, one of 35,000 or so investors.

"The steepness of the growth is leveling off, but it's not a concern," Palmer said. "We like the manner in which decisions are made and I don't worry about this being an organization jumping to a fad that won't pan out."

Patience has served Berkshire shareholders well. Investing in companies with dependable businesses and sound management has helped Berkshire as an investment trounce major competitors since Buffett took it over in 1965. Berkshire is now one of the largest US companies by market value, with more than 288,000 employees in dozens of businesses, covering everything from ice cream to underwear and insurance to railroads.

But its massive size - currently around $268 billion in market value - has made it hard for Berkshire to grow as fast as it once did. While Berkshire performs well in down markets, it can lag in rising markets.

Buffett reminded shareholders that 2009-2013 may prove to be the first five-year period ever when the company's growth in book value per share will lag the Standard & Poor's 500 index including dividends.

"People who buy stocks now and hold stocks for 20 years will make money," Buffett told Reuters Insider in an interview on Saturday evening. "Those who hold for 20 days, I don't know what will happen."

M&A, SUCCESSION

It has also become harder for the company to find deals that are large enough to move the needle. In February, Berkshire, along with Brazilian investment firm 3G Capital, struck a deal to buy ketchup maker H.J. Heinz Co, and Buffett said he was looking for more big acquisitions.

But in an interview on Friday, Berkshire Vice Chairman Charlie Munger said high prices have made attractive deals scare. "With interest rates at zero, the prices being paid for businesses are very high," Berkshire's second-in-command said.

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