Legions of Berkshire Hathaway investors, Warren Buffett acolytes and news organizations (including Yahoo!) will converge in Ohama, Nebraska this weekend for the company's annual shareholder meeting. "Woodstock for Capitalists," as the widely-attended event has come to be known, offers attendees the opportunity to get a glimpse of perhaps the most famous investor in the world.
But as Bloomberg points out in an article Thursday, Berkshire Hathaway stock (BRK-A) has trailed the S&P 500 Index (GSPC) for the last three years. Since May 5, 2009 shares of Berkshire, the conglomerate Buffett has built up over the past 40 years, have gained just 32 percent compared to 60 percent for the S&P 500. Bloomberg reports that Berkshire's growth has slowed as Buffett became more focused on takeovers in industries as diverse as railroads and machine tools.
The more pressing issue weighing on the company and shareholders involves Buffett's succession plan. Last December Buffett named his son Howard as non-executive chairman of Berkshire, an unpaid position with little if any influence over daily investing decisions. Buffett described the younger Buffett's role as "guardian" of the company's "values." Buffett turns 82 this August and Wall Street remains largely clueless as to who will fill Buffett's big shoes. A decision by Buffett to name his replacement has taken on an extra sense of urgency after he announced last month that he had been diagnosed with prostate cancer. The Daily Ticker's Aaron Task and Dan Gross discuss the future of Berkshire Hathaway and question whether Buffett, aka the "Oracle of Omaha," should continue to hold onto the world's greatest investor title.
"It's kind of telling when we talk about Buffett it's most often in the context of politics," Dan says. "It seems like only a small percentage of Buffett conversations are about what he's buying. Has [Buffet] transcended the mere world of results into a cultural icon?"
Buffett has certainly become almost synonymous with politics. Buffett's very public comments about his secretary paying a higher tax rate than he inspired President Obama to name his proposed tax on millionaires the "Buffett Rule." Debbie Bosanek, Buffett's longtime secretary, sat with the First Lady in her box at the president's State of the Union Address in January. Dan says Buffett's turn as a philanthropist and political activist puts him in the same league as Bill Gates, the co-founder and former CEO of Microsoft, who has become globally recognized as the one "who will solve the world's problems."
While Berkshire stock may be lagging, few investors have questioned Buffett's choice of companies. Buffett's mantra has been "slow and steady" and "he's not looking for a quick buck," Aaron says. Buffett may have missed hot growth stocks like Apple and Amazon, but his $44 billion investment in railroad operator Burlington Northern Santa Fe in 2009 was a savvy move for Berkshire. Some of the firm's biggest holdings — Costco (COST), M&T Bank (MTB), Johnson & Johnson (JNJ) and DirecTV (DTV) — have been a mixed bag; Buffett has been adjusting his stock portfolio, selling his stake in ExxonMobil (XOM) and buying shares of Intel (INTC) and IBM (IBM) this winter. Berkshire, one of the most expensive publicly traded stocks, continues to attract investors mainly because of Buffett's reputation and cult-like following. Yet the Buffett premium "is coming out of the stock," Aaron notes. "People are realizing he's mortal."