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My 2 questions for Warren & Charlie


valuebull
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I submitted these 2 questions for Warren & Charlie to the journalists that will be asking questions at the upcoming annual meeting...

QUESTION 1

It seems that value investors traditionally avoid companies with high debt levels.  And although I am very much in favor of Berkshire’s position in IBM, how did you get comfortable with IBM’s debt situation?  IBM has a debt to equity ratio of 3 (with an industry average of 1), increasing long term debt over the last few years, and a low interest coverage ratio of less than 50%.

 

I am hoping you can share some insights to help investors better understand debt when analyzing companies.

 

(These figures are from Morningstar’s website, 4/23/15)

QUESTION 2

 

Do you view inflation or deflation as the biggest looming threat?

 

(I went to the Fairfax Financial annual meeting recently and they think deflation is the looming threat, so much so Fairfax has invested significantly in deflation swaps.)

 

 

 

 

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Guest longinvestor

Here are my 2 ?s I've submitted to the panelists:

 

 

1. Mr. Buffett/ Mr. Munger, until a few years ago, Berkshire Hathaway was known as a brand predominantly in investment parlance. In other words, people knew of the Stock but not the company itself. Today, as I drive around my neighborhood, I see the BH Real Estate sign all over. Next, we will see that in car dealerships. Simultaneously, Berkshire Hathaway appears frequently in headlines, often associated with folly, scandal and such. From cockroaches in soups to forced repossessions of manufactured homes to gasoline laden train derailments. Are you worried about headline risk associated with the new strategy of lending the Berkshire Hathaway brand to your products and services? Is this somehow disruptive to the Berkshire Hathaway System which Mr. Munger wrote about in the annual report? Will this increase HQ costs? Distract from capital allocation? How are you thinking about this.

 

2. Mr. Buffett, we have a significant proportion of our net worth in the Berkshire Stock. So did you. While I liked the price at which I bought the stock, what brought the most comfort was that you “eat-your-own-cooking”.  What is the likelihood that the next CEO or the one after will also have much of their net worth in Berkshire stock. Is the Berkshire board thinking about this? Are there any incentives in place for the future Berkshire leaders to maintain a significant ownership stake? Are they going to be buying stock with their own money? How about the owner-operators of the subsidiaries?

 

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Guest longinvestor

Nice questions.... May I ask - where & who would I submit a question as well?

 

thanks

 

Read page 21 of the Annual Letter for instructions on how to submit your questions to the 3 journalists who will then select from all the ?s they have received.

 

You can also try the lottery at one of the microphones placed around the Centurylink stadium. I believe you have to be at the microphone between 7 AM and 9 AM to submit your name. About 2 to 3 get a chance this way.

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