A Berkshire Hathaway in transition will greet the tens of thousands of shareholders flocking to Omaha, Nebraska, this weekend to celebrate the 50th anniversary of Warren Buffett’s acquisition of the company.
Starting in 1965, Buffett initially converted the former Massachusetts textile maker into a gigantic stock holding company with purchases financed by the premiums paid to its substantial insurance operations.
In recent years, however, the company has made another dramatic transformation.
Berkshire has become more of a diversified conglomerate as it puts billions of dollars into buying all or big chunks of money-generating companies such as BNSF, Heinz, the big car dealer chain Van Tuyl Group, and most recently, Kraft Foods,
In his annual letter to shareholders in February, Buffett defended his “sprawling conglomerate” that’s “constantly trying to sprawl further.”
Acknowledging that conglomerates have a “terrible reputation with investors,” he wrote that Berkshire isn’t like the collections of companies that rose and fell in the 1960s.
Back then high-profile CEOs, lauded by an “adoring press,” used “dubious” accounting to boost their earnings per share by acquiring “mediocre” businesses with lower price-to-earnings multiples.
Berkshire, on the other hand, uses its conglomerate structure to move “huge sums from businesses that have limited opportunities for incremental investment to other sectors with greater promise” without incurring taxes and other costs.
It’s also, Buffett argued, “free of historical biases created by lifelong association with a given industry and (isn’t) subject to pressures from colleagues having a vested interest in maintaining the status quo.”
Buffett and his business partner Charlie Munger may get questions about that strategy, and suggestions they should spin off some subsidiaries, during their six-hour (including a one-hour lunch break) question-and-answer session on Saturday in Omaha’s almost 19,000-seat CenturyLink Center arena. (CNBC.com will have a live blog of the day’s events, which includes a newspaper throwing contest celebrating Buffett’s childhood career as a Washington Post paper boy.)
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While the Q&A marathon is a highlight for the more than 40,000 attendees expected, they’re also strongly encouraged to do a lot of shopping in the adjacent 194,300-square-foot hall that will feature products from dozens of Berkshire subsidiaries such as Justin Boots, Dairy Queen and See’s Candies. Wells Fargo and IBM, two of Berkshire’s biggest stock stakes, will have booths for the first time.
(Go to CNBC.com’s Berkshire Portfolio Tracker for a look at the company’s publicly traded U.S. stock holdings and their current market valuations.)
Shareholder discounts will also be offered at Berkshire’s Nebraska Furniture Mart and Borsheim’s Fine Jewelry store.