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Buffett, With His Magic Touch, May Be Irreplaceable


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Guest longinvestor

There we go again, rehashing of the same ol' fixation.

 

<<<The question really is what happens once Mr. Buffett isn’t around. Berkshire will still be a gigantic company with a lot of cash, but there are other companies out there of the same ilk. It all means that unless Berkshire can find another Warren Buffett, it may find its returns just aren’t as good.

Even though Mr. Buffett has hired and groomed other executives, he is a true star, and he cannot just create or transmit those qualities, which are the very ones that get those great deals. Unfortunately, there is only one Oracle of Omaha.>>>>

 

Below is an excerpt from the 2012 letter, where the investment priorities of BRK are outlined.

 

<<<<In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition>>>>

 

Priorities 1 thru 4 soaked up much of the cash in 2012. All indications at the meeting was that even more capital is likely going to be soaked up by 1-4; Some one in the media used an apt term "Under the radar"; If Warren/Charlie bag a couple of elephants, especially those that soak up more of the recurring capital in the future, the "occasional" 5th priority could become very occasional!

 

One of the most interesting questions asked at the meeting was an insinuation that BRK may be overpaying for recent M&A deals because they are more into the "good businesses at fair prices" thing. The suggestion was made that there may be more competition for the deals now than ever before (PE firms etc.). Munger kinda answered that in his inimitable way " No, there is never any competition for the deals that come to us". I believe he brought up GS and GE and said that Omaha was the very last stop they could have made with the bowl in hand :) There was simply not another stop for them, this was it. Similarly, virtually all of the businesses that ended up in the BRK fold willingly came to them because of what BRK does to them after the deal. Nothing. BRK stands alone in this regard. As Warren has said, all they have to keep doing in Omaha is to preserve the culture. Deals will keep coming. Folly will continue to happen, the begging bowls will come out and BRK will have ever more money! Who knows if this is true,  I read somewhere that Warren and Charlie may have written up a short list of investees for posterity including an appropriate price to pay! That tickled my fancy ;)!

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There we go again, rehashing of the same ol' fixation.

 

<<<The question really is what happens once Mr. Buffett isn’t around. Berkshire will still be a gigantic company with a lot of cash, but there are other companies out there of the same ilk. It all means that unless Berkshire can find another Warren Buffett, it may find its returns just aren’t as good.

Even though Mr. Buffett has hired and groomed other executives, he is a true star, and he cannot just create or transmit those qualities, which are the very ones that get those great deals. Unfortunately, there is only one Oracle of Omaha.>>>>

 

Below is an excerpt from the 2012 letter, where the investment priorities of BRK are outlined.

 

<<<<In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition>>>>

 

Priorities 1 thru 4 soaked up much of the cash in 2012. All indications at the meeting was that even more capital is likely going to be soaked up by 1-4; Some one in the media used an apt term "Under the radar"; If Warren/Charlie bag a couple of elephants, especially those that soak up more of the recurring capital in the future, the "occasional" 5th priority could become very occasional!

 

One of the most interesting questions asked at the meeting was an insinuation that BRK may be overpaying for recent M&A deals because they are more into the "good businesses at fair prices" thing. The suggestion was made that there may be more competition for the deals now than ever before (PE firms etc.). Munger kinda answered that in his inimitable way " No, there is never any competition for the deals that come to us". I believe he brought up GS and GE and said that Omaha was the very last stop they could have made with the bowl in hand :) There was simply not another stop for them, this was it. Similarly, virtually all of the businesses that ended up in the BRK fold willingly came to them because of what BRK does to them after the deal. Nothing. BRK stands alone in this regard. As Warren has said, all they have to keep doing in Omaha is to preserve the culture. Deals will keep coming. Folly will continue to happen, the begging bowls will come out and BRK will have ever more money! Who knows if this is true,  I read somewhere that Warren and Charlie may have written up a short list of investees for posterity including an appropriate price to pay! That tickled my fancy ;)!

 

Yup, when asked at the AGM what is BRK's long term competitive advantage, both Warren and Charlie answered enthusiastically that it was BRK's culture and stated policy of providing a secure home for businesses whose owners wouldn't want their prized horses sold to the highest bidder who might mistreat them and when there was nothing left to give, send them to the glue factory.

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Guest longinvestor

There we go again, rehashing of the same ol' fixation.

 

<<<The question really is what happens once Mr. Buffett isn’t around. Berkshire will still be a gigantic company with a lot of cash, but there are other companies out there of the same ilk. It all means that unless Berkshire can find another Warren Buffett, it may find its returns just aren’t as good.

Even though Mr. Buffett has hired and groomed other executives, he is a true star, and he cannot just create or transmit those qualities, which are the very ones that get those great deals. Unfortunately, there is only one Oracle of Omaha.>>>>

 

Below is an excerpt from the 2012 letter, where the investment priorities of BRK are outlined.

 

<<<<In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition>>>>

 

Priorities 1 thru 4 soaked up much of the cash in 2012. All indications at the meeting was that even more capital is likely going to be soaked up by 1-4; Some one in the media used an apt term "Under the radar"; If Warren/Charlie bag a couple of elephants, especially those that soak up more of the recurring capital in the future, the "occasional" 5th priority could become very occasional!

 

One of the most interesting questions asked at the meeting was an insinuation that BRK may be overpaying for recent M&A deals because they are more into the "good businesses at fair prices" thing. The suggestion was made that there may be more competition for the deals now than ever before (PE firms etc.). Munger kinda answered that in his inimitable way " No, there is never any competition for the deals that come to us". I believe he brought up GS and GE and said that Omaha was the very last stop they could have made with the bowl in hand :) There was simply not another stop for them, this was it. Similarly, virtually all of the businesses that ended up in the BRK fold willingly came to them because of what BRK does to them after the deal. Nothing. BRK stands alone in this regard. As Warren has said, all they have to keep doing in Omaha is to preserve the culture. Deals will keep coming. Folly will continue to happen, the begging bowls will come out and BRK will have ever more money! Who knows if this is true,  I read somewhere that Warren and Charlie may have written up a short list of investees for posterity including an appropriate price to pay! That tickled my fancy ;)!

 

Yup, when asked at the AGM what is BRK's long term competitive advantage, both Warren and Charlie answered enthusiastically that it was BRK's culture and stated policy of providing a secure home for businesses whose owners wouldn't want their prized horses sold to the highest bidder who might mistreat them and when there was nothing left to give, send them to the glue factory.

 

When it comes to culture, we have to remember that BRK has several folks like Ajit Jain who is just as good as valuing and making large deals. It just so happens that Warren/ Charlie are the ones who speak to the public. I hope Coombs, Weschler, Jain, Abel et al don't go public with anything for a long time after Warren / Charlie.

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There we go again, rehashing of the same ol' fixation.

 

<<<The question really is what happens once Mr. Buffett isn’t around. Berkshire will still be a gigantic company with a lot of cash, but there are other companies out there of the same ilk. It all means that unless Berkshire can find another Warren Buffett, it may find its returns just aren’t as good.

Even though Mr. Buffett has hired and groomed other executives, he is a true star, and he cannot just create or transmit those qualities, which are the very ones that get those great deals. Unfortunately, there is only one Oracle of Omaha.>>>>

 

Below is an excerpt from the 2012 letter, where the investment priorities of BRK are outlined.

 

<<<<In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition>>>>

 

Priorities 1 thru 4 soaked up much of the cash in 2012. All indications at the meeting was that even more capital is likely going to be soaked up by 1-4; Some one in the media used an apt term "Under the radar"; If Warren/Charlie bag a couple of elephants, especially those that soak up more of the recurring capital in the future, the "occasional" 5th priority could become very occasional!

 

One of the most interesting questions asked at the meeting was an insinuation that BRK may be overpaying for recent M&A deals because they are more into the "good businesses at fair prices" thing. The suggestion was made that there may be more competition for the deals now than ever before (PE firms etc.). Munger kinda answered that in his inimitable way " No, there is never any competition for the deals that come to us". I believe he brought up GS and GE and said that Omaha was the very last stop they could have made with the bowl in hand :) There was simply not another stop for them, this was it. Similarly, virtually all of the businesses that ended up in the BRK fold willingly came to them because of what BRK does to them after the deal. Nothing. BRK stands alone in this regard. As Warren has said, all they have to keep doing in Omaha is to preserve the culture. Deals will keep coming. Folly will continue to happen, the begging bowls will come out and BRK will have ever more money! Who knows if this is true,  I read somewhere that Warren and Charlie may have written up a short list of investees for posterity including an appropriate price to pay! That tickled my fancy ;)!

 

Yup, when asked at the AGM what is BRK's long term competitive advantage, both Warren and Charlie answered enthusiastically that it was BRK's culture and stated policy of providing a secure home for businesses whose owners wouldn't want their prized horses sold to the highest bidder who might mistreat them and when there was nothing left to give, send them to the glue factory.

 

Ask any executive what their competitive advantage is and 95% will respond "our culture" or "our people."

 

While I agree that Buffett and Munger have established quite a team they are not unique in thinking what makes them unique.

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Good point, and imo a big question is: does great culture create a great business, or does a great business great a great culture? Probably a bit of both, while most people like to attribute all the success to the culture that they created.

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Guest longinvestor

There we go again, rehashing of the same ol' fixation.

 

<<<The question really is what happens once Mr. Buffett isn’t around. Berkshire will still be a gigantic company with a lot of cash, but there are other companies out there of the same ilk. It all means that unless Berkshire can find another Warren Buffett, it may find its returns just aren’t as good.

Even though Mr. Buffett has hired and groomed other executives, he is a true star, and he cannot just create or transmit those qualities, which are the very ones that get those great deals. Unfortunately, there is only one Oracle of Omaha.>>>>

 

Below is an excerpt from the 2012 letter, where the investment priorities of BRK are outlined.

 

<<<<In summary, Charlie and I hope to build per-share intrinsic value by (1) improving the earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) participating in the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition>>>>

 

Priorities 1 thru 4 soaked up much of the cash in 2012. All indications at the meeting was that even more capital is likely going to be soaked up by 1-4; Some one in the media used an apt term "Under the radar"; If Warren/Charlie bag a couple of elephants, especially those that soak up more of the recurring capital in the future, the "occasional" 5th priority could become very occasional!

 

One of the most interesting questions asked at the meeting was an insinuation that BRK may be overpaying for recent M&A deals because they are more into the "good businesses at fair prices" thing. The suggestion was made that there may be more competition for the deals now than ever before (PE firms etc.). Munger kinda answered that in his inimitable way " No, there is never any competition for the deals that come to us". I believe he brought up GS and GE and said that Omaha was the very last stop they could have made with the bowl in hand :) There was simply not another stop for them, this was it. Similarly, virtually all of the businesses that ended up in the BRK fold willingly came to them because of what BRK does to them after the deal. Nothing. BRK stands alone in this regard. As Warren has said, all they have to keep doing in Omaha is to preserve the culture. Deals will keep coming. Folly will continue to happen, the begging bowls will come out and BRK will have ever more money! Who knows if this is true,  I read somewhere that Warren and Charlie may have written up a short list of investees for posterity including an appropriate price to pay! That tickled my fancy ;)!

 

Yup, when asked at the AGM what is BRK's long term competitive advantage, both Warren and Charlie answered enthusiastically that it was BRK's culture and stated policy of providing a secure home for businesses whose owners wouldn't want their prized horses sold to the highest bidder who might mistreat them and when there was nothing left to give, send them to the glue factory.

 

Ask any executive what their competitive advantage is and 95% will respond "our culture" or "our people."

 

While I agree that Buffett and Munger have established quite a team they are not unique in thinking what makes them unique.

 

Yeah, culture is often loosely used in a feel good way. The specific culture at BRK that Warren/Charlie were speaking about was how they treat the owner operators who sell to BRK  and how this makes their deals different. I tend to agree with Warren/Charlie that BRK is unique here.

 

If the author of the article which claims that there are several others like BRK "out there" why don't they name them?

 

Requirements are simple:

- 50 year track record of providing a permanent home to the sellers business

- "Leave you alone" to continue to run your business

- Tens of Billions cash on hand; Perennial source of ongoing capital needs

 

Any names?

 

How about this, ask someone like Heinz/Wertheimer family if they had someone else in mind before they made the deal with BRK?

 

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This article is phenomenally wrong on several counts

 

Even after Buffett, Berkshire will have enormous capital to invest. The management/board of companies love to get an investor who doesn't agitate for board/ceo changes, change strategy and interfere in CEO's actions. This fact will persist for a long time and give enormous structural advantage to Berkshire.

 

Can you ever think of Loeb or Icahn investing 5% into a company and sitting on the sidelines?

 

Buffett/Berkshire's hands off approach is well known and will pay off dividends for decades.

 

http://dealbook.nytimes.com/2013/05/21/buffett-with-his-magic-touch-may-be-irreplaceable/?partner=yahoofinance

 

All we need is 5 more years for Buffett to stay at the helm for class A shares to reach $500,000! LOL :-)

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