Buffett

Print and broadcast media headline stories say Warren Buffett Bought This or Warren Buffett Bought That. What is meant isn’t that Mr. Buffett bought it for his own account; instead, Berkshire Hathaway acquired 50 percent of Heinz, 100 percent of Burlington Northern Sante Fe or whatever. 

Warren Buffett is the chairman of Berkshire, and Berkshire is the buyer. With a merry band of 25 souls in Omaha, Neb., and Vice Chairman Charlie Munger in California, Berkshire runs one of the largest conglomerates in America, one that owns unexpected household names like Dairy Queen and Benjamin Moore. His name is so synonymous with the company that the words Buffett and Berkshire are practically interchangeable. Of course, the conglomerate has hundreds of thousands of employees; the question is this: how do 25 people (26, if you count Munger, the perfect counter to Buffett) manage hundreds of thousands of employees? The answer is this: they don’t.

It’s true that Mr. Buffett has his own private investments, but those are rarely discussed. The bulk of his wealth is in the value of his Berkshire stock; he owns a great deal of the stock, and the balance is owned by his partners, the shareowners.  

Since my wife and I (both shareholders) are back from the May 4^th meeting in Omaha, I thought it would be a good idea to explain why I like Berkshire. (Any person with $111.82 [Friday’s close] to invest may be a Berkshire B shareholder.  The A shares were $167,668.18 more than the B shares on Friday, May 10^th. But either A or B gets you to the meeting, and both share classes enjoy stunning performance. B shares are pegged to A by 1500/1; A shares are convertible to B but not vice-versa).  

Here are some of the reasons Berkshire is my favorite company and one of my favorite investments:

(1) Transparency — Warren and Charlie explain everything they do in print and at the annual Q and A.

(2) Fair compensation — All subsidiaries have clear and fair executive compensation plans.

(3) Open and aboveboard communications — For example, there are few footnotes in Berkshire’s annual reports, very few. The ones that exist are explanatory or to credit a source, and they are printed in typeface large enough to read and worded in ways that are supremely rational and understandable.

(4) A culture of honesty — When an executive even slightly varies from the Berkshire line of commonsense morality, he or she is on the curb with his or her suitcase  within a few days or hours.

(5) Shareowner bliss — Berkshire is one of the only companies I know that treats shareholders right, like owners. Berkshire is accountable to shareholders, whereas, with other companies, the feeling is often that shareowners are a subclass and the executives have all the power (and a lot of the money).