Five questions for Warren Buffett

Warren Buffett faces perhaps the most turbulent Berkshire Hathaway annual meeting yet on Saturday. Here's a Q & A with someone who follows Warren Buffett closely.

Mustafa Quraishi/AP/File
Billionaire investor Warren Buffett gestures at a press conference in New Delhi March 24, 2011. His Giving Pledge, founded with Bill and Melinda Gates, has signed up 69 billionaires who promise to give away most of their fortunes to charity.

This weekend marks perhaps the most widely watched shareholder meeting in the world. Up to 40,000 shareholders could show up in Omaha, Neb., to hear Warren Buffett talk about Berkshire Hathaway. Liz Claman, FOX Business Network anchor, interviewed Mr. Buffett prior to the meeting. On Friday, she shared her insights into his thinking. Here’s an edited version of what she said:

1. Is Buffett still bullish?

He said everything is looking better except his housing businesses. Berkshire has dozens of businesses: Acme Brick, Clayton Homes [prefab homes]. He owns Benjamin Moore paint. The businesses that are involved in housing don’t look better. I pressed him on that: not even a little? He said no. Everything else is better.

2. He’s buying chemicalmaker Lubrizol for $9 billion. Where else is he going to invest?

He will look at every company that comes his way. He will pore through its financial statements. He’ll ask: Does it make a lot of cash? Does it have a moat of income security? That’s why he loves Posco, a Korean steelmaker. That’s why he loves Coca-Cola. He wants companies where no one does it better.

People always ask: Do you like Korea [to invest in]? That’s a dumb question for Warren Buffett. He doesn’t care where the company is headquartered.

3. The Lubrizol purchase, and the personal profit made by former heir apparent David Sokol, has clouded the succession picture at Berkshire Hathaway. With Mr. Sokol out, who will take over?

Other journalists feel there’s a list. I don’t. On Fox Business, his children confirmed to me that their father is very disappointed [with Mr. Sokol].

So who’s going to run the company? Tony Nicely [chairman of GEICO, owned by Berkshire]? Warren Buffet says he doesn’t want an old guy to run the company. Matt Rose [CEO of Berkshire’s Burlington Northern Santa Fe] on Fox Business Network said flat out: “I want to run my railroad.” Ajit Jain [head of several Berkshire reinsurance businesses]? He loves insurance. He’s based in Connecticut. My sources say he bought an apartment in New York recently. I don’t think he wants to run a thoroughly Omaha company.

4. Is Buffett the kind of person to give up the reins, anyway?

Shareholders … are googly-eyed about Warren Buffett, so he can do what he wants. When he’s gone, they’re going to demand things. He won’t go, unless something happens. He loves this company so much.

This [succession issue] may force the board to become much more active. I talked to [Microsoft chairman and Berkshire director] Bill Gates [who said]: “Warren calls us after he makes the purchase. Warren makes the decisions.” That’s very unusual for a board. I think this Dave Sokol thing has woken up a lot of people.

5. How important are the charges of ethics violations and insider trading against Sokol?

I want to ask Buffett: Are you going to completely overhaul your corporate governance policies? It’s not just this little upstairs/downstairs drama in Omaha. These people [at Berkshire] are privy to major inside information that can sway shares of companies. People may look at what he does and change their own governance policies.

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