Berkshire Hathaway's AGM: “Warren's Woodstock” turns ugly

The successor to legendary investor Warren Buffett has finally been named. But discontent among Berkshire Hathaway’s shareholders is spreading. Alex Rankine reports.

Berkshire Hathaway, the holding company of legendary investor Warren Buffett, has held its annual shareholder meeting. The event, dubbed “Woodstock for capitalists”, has been happening virtually because of the pandemic . It yielded the usual mixture of folksy commentary and gnomic wisdom. Buffett said that the US economy is “red hot” and Berkshire’s portfolio of businesses “is seeing substantial inflation”. He joked that Charlie Munger, his 97-year-old deputy, will be ageing at just “1% annually” once he hits his centenary. Munger dubbed bitcoin “a currency that’s so useful to kidnappers and extortionists”. 

It hasn’t been quite the usual love-in, says Robert Cyran on Breakingviews. The “pew-sitters in the Church of Buffett” revolted, with one-quarter of shareholders voting to require more disclosure about efforts to “address climate change” and encourage “workforce diversity”. Management defeated the proposal, with Buffett arguing that imposing standardised box-ticking exercises on Berkshire’s portfolio of very different businesses was “asinine”. Still, the quarrel highlights a “generational divide” between the “nonagenarian” Buffett and many of his shareholders. It may also reflect growing discontent with Berkshire’s recent performance. 

Has Warren Buffett lost his magic touch?

During his 56 years at Berkshire, Buffett has transformed it from a “troubled textile firm” into “a $630bn conglomerate”, says The Economist. Over that period its stock has delivered compound annual gains of 20%, double the average for the wider US market. Yet in the last decade Berkshire has beaten the S&P 500 just twice, and conspicuously underperformed it in four of those years. Questionable decisions include badly-timed bets on airlines and a $13.8bn punt on heavily-indebted foods giant Kraft Heinz that soon “soured”. 

Above all, highly inflated US stock prices make life difficult for a value investor like Buffett. When markets plunged last March it should have been a golden opportunity, says Tara Lachapelle on Bloomberg. Berkshire has $145bn in cash to deploy when it spots a bargain. Yet for all Buffett’s injunctions never to “bet against the US”, Berkshire has sold more than a net $12bn of stock since the start of 2020. That’s a poor choice given the S&P 500’s 26% return in that time. 

Buffett has no plans to step aside any time soon, but he has finally put “one of the biggest succession questions in corporate America” to rest, say Geoffrey Rogow and Justin Baer in The Wall Street Journal. He has confirmed that “if something were to happen to me tonight”, then vice chairman Greg Abel would step in. The 58-year-old Canadian has overseen Berkshire’s sprawling energy investments since 2008. A company insider, he is described “as a level-headed presence” who will apply a similar investment approach to Buffett. Shareholders will be relieved, Cathy Seifert of CFRA Research told Eric Platt in the Financial Times, that the succession “parlour game” is finally resolved.

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