Warren Buffett has attracted sceptics throughout his career when the stock of his Berkshire Hathaway Inc languished. Now that the shares are rallying, the billionaire is looking for another critic.
Buffett said he's seeking an investment professional who's bearish on Berkshire, or betting on the stock's decline, to fill a seat on a panel of questioners at his company's annual meeting May 4 in Omaha, Nebraska. The individual will ask questions alongside analysts Cliff Gallant of Nomura Holdings Inc and Ruane Cunniff & Goldfarb Inc's Jonathan Brandt, Buffett said in his annual letter to investors March 1.
"Talk about Daniel in the lion's den," said Jeff Matthews, a Berkshire investor and author of books about Buffett. "It will be fascinating to see, (a) who bites and, (b) if the guy will actually get out of the room alive."
The call for applications is the latest twist in the format of a meeting that draws tens of thousands of shareholders each year to hear Buffett and Berkshire vice-chairman Charles Munger's views on investing, corporate governance, the economy, politics and life. Buffett, who has entertained shareholders in past meetings with musings on baseball and Paris Hilton, has sought to steer talk in recent years back toward Berkshire.
In 2009, he invited a panel of journalists, including longtime friend and Fortune magazine writer Carol Loomis, CNBC's Becky Quick and the New York Times's Andrew Ross Sorkin to alternate asking questions with the audience.
Insurance analysts
Last year, Buffett added a panel of three insurance analysts to pose more queries about Berkshire businesses such as Geico and General Re. That proved too narrow of a focus for some shareholders, he wrote in this year's letter.
Gallant, whose hiring was announced by Nomura last month and who previously sat on the analyst panel when he worked for KBW Inc, will be in Omaha again, asking questions about insurance, Buffett said. Tokyo-based Nomura has been seeking to bolster equity-research operations in the US, and this year's acquisition of KBW by Stifel Financial Corp displaced staff.
Brandt will inquire about Berkshire's other businesses, such as railroad Burlington Northern Santa Fe. His employer, Ruane Cunniff, has long ties to Buffett. When the billionaire shut his investment partnership in 1970, he steered clients toward the firm, according to Alice Schroeder's biography The Snowball: Warren Buffett and the Business of Life. His friend Bill Ruane set up the Sequoia Fund specifically to take the accounts, Schroeder wrote.
'Sober, thoughtful'
Buffett, Berkshire's chairman and chief executive officer, should be able to find someone willing to take a contrary view of his company, even though the environment may be unfriendly, Matthews said.
"Never underestimate people's capacity for self- promotion," he said in a phone interview. "I think he'll have takers. Whether they pass muster in terms of being sober, thoughtful guys who can go up against two of the smartest investors who've ever lived, I don't know."
Buffett, 82, has increased Berkshire's book value per share, a measure of assets minus liabilities, more than 5,800- fold since he took control of the company in 1965. The Class A shares closed at a record $152,750 on March 1 and rallied 30 per cent in the past year as Buffett bought back stock and struck a deal to take Pittsburgh-based ketchup maker H J Heinz Co private.
Technology stocks
He was challenged by an investor at the 2000 meeting for skipping technology stocks after Berkshire dropped 20 per cent in 1999 while the Standard & Poor's 500 Index gained 20 per cent. Buffett responded that he didn't understand technology firms and later was vindicated as the dot-com bubble burst.
Berkshire was stripped of its AAA grade from Fitch Ratings in 2009 after losses on Buffett's derivatives bets.
The stock had plunged more than 30 per cent in the year before the downgrade.
Building the bearish case now may be tough, said James Armstrong, president of Henry H Armstrong Associates, a Pittsburgh-based investment manager that oversees about $375 million, including Berkshire stock, for charities and families. Shares of Buffett's company are trading at 34 per cent more than book value, compared with an average premium of more than 60 per cent since 1990, according to data compiled by Bloomberg.
"In order to be a serious bear, you have to ignore mathematics," Armstrong said in a phone interview. "The company is such a treasure chest of assets and earnings streams, trading at such a bargain stock price."
