* Berkshire Hathaway annual meeting May 5
* Focus to turns to state of Buffett’s health
* Analysts with “buy” ratings allowed to question Oracle
By Ben Berkowitz
April 30 (Reuters) – Warren Buffett is not one to talk much
about his personal life in public, but his prostate cancer may
dominate the conversation this weekend when his conglomerate
Berkshire Hathaway convenes its annual shareholder
meeting.
The event dubbed “Woodstock for Capitalism” draws more than
40,000 shareholders to Omaha, Nebraska’s convention center for a
weekend of festivities, the highlight of which being the
questions Buffett takes from investors. This year, for the first
time, he will also entertain questions from a select group of
analysts who follow Berkshire’s stock.
Last year’s meeting was dominated by the scandal-driven
resignation of one-time Buffett heir apparent David Sokol. Few
expected fireworks this year — at least until Buffett’s April
17 disclosure that he has stage 1 prostate cancer and will begin
radiation treatment in July.
Bill Smead, chief investment officer of Smead Capital
Management and a Berkshire investor, said he and investors like
him are hoping for more substance from this year’s session.
“I’d like it to go back to answering meaningful questions,”
said Smead, who holds both Class B shares and instruments
representing fractional Class A shares.
The health issue is part of the larger succession question
that has hung over Berkshire in recent years and has weighed on
the company’s share price. Buffett, 81, assuaged some of those
concerns in February when he said the company had identified the
person who would eventually succeed him as chief executive.
Of course, Buffett may have made the problem worse when he
said a few days later that his designated successor had not been
made aware of the fact.
The shortlist includes Berkshire’s reinsurance boss Ajit
Jain, railroad executive Matthew Rose and GEICO CEO Tony Nicely.
All have their backers, though none are likely to get a public
nod until the day when Buffett can no longer work.
QUESTIONS FROM THE STREET
Aside from the health question, the other major change this
year is that Buffett will take questions from the Wall Street
analysts he has historically held in such low regard.
A hand-picked panel of three insurance analysts, all of whom
have “buy” ratings on the stock, will likely question Buffett
about the stock’s recent performance and future potential.
One, Barclays Capital’s Jay Gelb, raised his price target on
Berkshire’s Class B shares last Friday as part of a 115-page
review of the company’s operations. Gelb and another of the
questioners, KBW’s Cliff Gallant, have both had the equivalent
of a “buy” rating on the stock since last August.
“The question that’s never been asked as far as I know,
nobody’s ever asked Warren Buffett ‘why do you think the stock
price has lagged so much?'” said Steve Check, president and
chief investment officer of Check Capital Management in
California.
“We get that from our clients,” said Check, whose firm’s
largest holding by a wide margin is Berkshire B shares.
Through April 24, Berkshire’s more widely held Class B
shares were up 4.1 percent for the year, less than half the
gains of the S&P; 500 or of the S&P; insurance index.
The stock also underperformed the S&P; 500 in two of the last
three years.
Many people maintain the stock is undervalued, perhaps even
at one of its lowest valuations ever, but some say a discount
could be warranted given the succession question.
Shareholders will also be hoping for a look at the two men
who will shepherd Berkshire’s investment portfolio after Buffett
is gone, newly hired managers Todd Combs and Ted Weschler.
Combs has been building his portfolio, taking Berkshire into
more tech and retail investments, while Weschler recently
started and will soon show his hand.
(Reporting By Ben Berkowitz; Editing by Maureen Bavdek)
