What's Next for Berkshire Hathaway

This summer, I've shared some of my findings about Mr. Buffett -- everything from his political and investment views to his fun side. What is next for his company?

Currently, Mr. Buffett has a few people in mind to replace him as chief executive, but a chief investment officer is also being sought. He currently holds both of these positions. Mr. Buffett gave the following qualifications for the job in the Berkshire Hathaway annual report:

Over time, markets will do extraordinary, even bizarre, things. A single, big mistake could wipe out a long string of successes. We therefore need someone genetically programmed to recognize and avoid serious risks, including those never before encountered. Certain perils that lurk in investment strategies cannot be spotted by use of the models commonly employed today by financial institutions.

Buffett anticipates another problem the company could face. Anybody who takes the position as chief investment officer would have something great to put on their resume.

"We will need, therefore, to be sure we can retain our choice, even though he or she could leave and make much more money elsewhere," Buffett wrote.

However, with all of this talk of replacement, Buffett states that he is in good shape and has no plans for giving up his position anytime soon. "At 76, I feel terrific and, according to all measurable indicators, am in excellent health," he writes. "It’s amazing what Cherry Coke and hamburgers will do for a fellow."

Stocks Sold Because of Darfur?

I do not often hear about Warren Buffett selling any of his huge number of stocks, but that’s just what was in the news today.

The company involved is PetroChina Co, a Chinese Oil Company, and this report indicates that Buffett sold 16.9 million of his shares in the company. The sale, worth 210 million Hong Kong dollars (or 27 million U.S. dollars), reduced Mr. Buffett’s stake in the company to 10.96 percent from 11.05 percent.

PetroChina is owned by the China National Petroleum Corp. (CNPC). The controversy over Darfur stems from CNPC’s involvement with Sudan. “Activists say Chinese investments are helping Sudanese leaders resist pressure over Darfur,” according to the article.

Buffett responded to these allegations by stating at last May’s annual meeting, “PetroChina in no way tells the Chinese government what to do. We have no disagreement with what PetroChina is doing."

There is no word as to whether Buffett’s decision to sell had anything to do with the Darfur controversy, but the article states that other groups have jumped ship as well:

In May 2006, the California Public Employees' Retirement System, or Calpers, put PetroChina on a list of nine companies linked to Sudan that it would stop investing in. Other states and university endowments also have sold their shares in the company.

The Buffett Premium

There was recent speculation that Warren Buffett was interested in purchasing a stake in Hovnanian Enterprises, a homebuilding firm. It's nothing new to hear about a new purchase by the company. What was interesting to me was what this article calls "The Buffett Premium." That's what happens when the stock price of a company rises when there is news of a possible purchase by Buffett.

It is also worth noting that the building industry is currently in a slump due to the low housing market. Even in these conditions, Buffett is willing to buy, as the article states:

The homebuilding industry is currently one of the worst-performing sectors out there, and that's where you'll always find Buffett, swooping in to buy what no one else wants, at big discounts. In other words, Mr. Market's famous mood swings might very well be causing him to once again offer some sound businesses at bargain-basement prices.

An Upscale Dairy Queen

I realized how far and wide Berkshire Hathaway's investments extend when I found this news story. Dairy Queen is opening a new store in Lancaster, New York, according to The Buffalo News.

What's interesting is that Dairy Queen and The Buffalo News are owned by Berkshire Hathaway, according to the article.

The Dairy Queen mentioned in the story is a DQ Grill & Chill, which features a more diversified menu than Dairy Queen's Brazier stores. Instead of just offering food such as hamburgers and hot dogs, the Grill & Chill stores' selections include turkey sandwiches and quesadillas. The atmosphere is also a step up from the other DQ stores.

This subject was also particularly interesting to me because I have visited the DQ Grill & Chill in Columbia City (located here). That is the only Grill & Chill in this area that I know of.

Buffett does it all. Underwear, insurance, newspapers, furniture, and, yes... ice cream.

Facebook and Buffett?

Ok, enough about Warren's political preferences. On to something a little more fun.

It appears that Mr. Buffett has quite a following on Facebook, judging by the number of discussion groups devoted to him. Some of the names of the groups include Buffettologists, Warren Buffet Investment Club, and Warren Buffet Is My Hero.

A group called The Berkshire Way states that the group "is a philosophy of life that we collectively aim to emulate and practice throughout our lives. It's [sic] chief practitioner and ideologue is Mr. Warren E. Buffett, the greatest investor and philanthropist of the 20th century."

These virtual groups boast memberships of anywhere from 6 to 216. It seems that these groups are excellent places to to find offbeat news about Warren Buffett or Berkshire Hathaway. Through Wall writings and discussion board postings, I learned about Warren's ex-daughter in-law giving an interview (and where I could find it on the web) and that there are 10 secrets hidden in Warren Buffett's wallet.

So why are these groups created? Going back to The Berkshire Way, the groups' information page states, "Those of us, who have dedicated our lives to following in Mr. Buffett's footsteps have a great responsibility to pass on his wisdom to posterity, and more importantly to put into practice his great teachings."

More About Buffett and Politics

It seems that the media has been paying more and more attention to Warren Buffett's political stance lately (see my post about Hillary Clinton). A Friday the 13th article by the AP has some additional information about his possible endorsements for the 2008 presidential election. The article by Josh Funk states:

For now, the plainspoken Nebraska billionaire appears to be enjoying his role as an unaffiliated kingmaker, raising money for Democrat Hillary Rodham Clinton while promising to do the same for her chief rival, Barack Obama. He's even heaped praise on New York Mayor Michael Bloomberg, who recently left the Republican Party and might join the race as an independent.

There is speculation that those who follow Buffett's investments will also follow his political activities.

Among the other points of the article, I found out that Buffett was the top economic advisor for Republican Arnold Schwarzenegger in the 2003 recall election for California governor. Although this job involved working for a Republican, the article indicates that Mr. Buffett raises far more money for Democrats. He has donated a total of $65,600 to federal candidates since 1992, with almost all of that going to Democrats.

Once again, this article points out Buffett's controversial views on the tax system:

[Buffet has] made no secret of his belief that rich people have a duty to pay more taxes and that President Bush and Republicans in Congress have erred by pushing tax cuts for the wealthy.

"If you're in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent," Buffett told attendees at the Clinton fundraiser.

And, finally, I learned the history behind Buffett's preference for the Democratic party:

Buffett grew up a Republican like his father, Howard, who represented Nebraska's 2nd District in Congress from 1943-49 and 1951-53. The younger Buffett switched parties during the early 1960s, saying his views on civil rights aligned more with Democrats.

Buffett Sings with Fruit

This singing took place at the 2006 Berkshire Hathaway shareholders meeting, according to the video's description on YouTube. I'm not surprised by what I see, considering Warren's sense of humor.

This is a good time to discuss Fruit of the Loom, one of Berkshire Hathaway's companies with a strong brand reputation. I found these facts in the company's relatively short Wikipedia article:

• Fruit of the Loom was established in 1851 in Rhode Island.
  
  
• Fruit of the Loom filed for Chapter 11 bankruptcy protection in 1999 -- the stock fell from $44 in 1997 to $1 in 2000.
  
  
• The company was bought out in 2002 by Berkshire Hathaway.
  
  
• FOTL purchased Russell Corporation in 2006.
  

Update: Lunch with Warren Buffett brought a winning bid of $650,100, with a total of 72 bids.