Many of you Buffett aficionados know that Warren changed the Q&A process at the annual meeting. In the past, audience members simply queued up at the microphones; now they email questions into a panel of reporters and analysts, who ask those questions as well as their own.
The audience still gets to participate, but it is far more limited...probably to good effect, since the quality of questions has declined in inverse proportion to the audience size.
(Read this story from Real Money on how the S&P 500 has traded following the previous 10 meetings for more on the history of the event).
When I went to my first Berkshire Hathaway (BRK.A; BRK.B) annual meeting in 1991, even then, in the "large" crowd, you would ask a question by raising your hand and waiting for the microphone! Alas, now I have been spamming Becky Quick and Carol Loomis for months, hoping one of these email-delivered questions gets through. Here are the questions I would ask Warren at the BRK annual meeting -- his 51st, my 25th.
- With each passing year, succession gets more important. We understand your choice of CEO is in place, and we understand you consider him/her highly qualified. Without revealing so much that we (and he/her) can guess who it is, can you outline his/her qualifications? Very few people are qualified to run a multi-hundred billion conglomerate...why is this person? Presumably, the person is an insider... is that a necessity? Why not an outsider?
- Todd and Ted seem to be doing a good job running their portfolios, and are up to several billion dollars under management. Is this enough for them to be fully prepared to allocate the complete cash flow of BRK, when that day comes (and it is likely to come suddenly)? Are just two of them enough, once they are allocating multiple billions?
- How involved are Todd and Ted now in the big acquisitions you engage in? Have they led any big, whole-company acquisitions? How much do they interact with the future CEO in vetting big acquisitions -- which is probably the most important preparation for the future post-Buffett BRK?
- The past few years, the performance of BRK -- both book value and share price -- has been spotty vs. the S&P 500. Why is the S&P 500 the best benchmark for you? Wouldn't a blend of insurance and industrial ETFs be better?
- If you were a young guy starting out in the hedge fund world again, would you be buying a large, mature conglomerate to accumulate wealth? We looked at your early holdings, and other than capturing some value opportunities in large, mature companies like American Express (AXP), you seemed to find younger, smaller, promising growth names, like See's. It seems like you are a victim of your own success...BRK is now a wealth preservation vehicle, not a wealth accumulation vehicle. Would you disagree with this characterization? Would you encourage the young people here in the audience to follow your precepts, but apply them to smaller, up-and-coming names?
- Berkshire's insurance business is relatively immune from low or possibly negative interest rates, because you invest the float in equities. Most insurance companies, by regulation or policy, invest in bonds...and real trouble is brewing because of it. With fixed income returns paltry, their cost of money needs to decline significantly. Do you see a period of benign pricing coming, as major insurers attempt to generate an underwriting profit, effectively creating a negative cost of capital in order to create a spread against low/negative yield?
- As much as you want to believe that there is some sort of synergy between all the BRK companies, the reality is that the company is really just your portfolio. You are trying to capitalize on the brand you have built, which is a cult of personality around you, to rename some of the businesses, such as Home Services and Energy. Good try, I suppose. You naturally want BRK to continue "as is" after your death, but really, in your absence, why should all these companies operate under the same roof? Can you name any conglomerates that have survived and thrived over the long term as an aggregation of unrelated businesses? Even the great large businesses of our time, like General Electric (GE), are being de-conglomerated and rationalized. Tell us what your Plan B for BRK would be. If you had to, how would you carve up BRK into four or five operating companies that actually make sense as focused, rationalized businesses?
I have a million more for him, but these are the burning questions of the day. I will be posting real time from the meeting, so watch the Columnist Conversation this weekend for my spin on the action, as it unfolds, and whether we get answers to these questions.