Berkshire Meeting: Effusive Praise for Ted Weschler and Todd Combs

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Jay Gelb from the analyst panel asks if Berkshire will consider raising its buyback floor higher than 120% of book value, reminding the audience that Mr. Buffett said last year that raising the floor might be an option if Berkshire had $100 billion or $120 billion in cash sitting around and it "really becomes apparent that we can not use capital effectively within the company."

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In the just released first-quarter earnings, Berkshire showed that it now hold more than $95 billion in cash and cash equivalents (including Treasurys), an all-time high.

Mr. Buffett says that a time could come "reasonably soon, even while I am around" when Berkshire will have more cash than it can reasonably and profitably deploy. And Berkshire may return them with additional stock buybacks, and even, he admits it "could be dividends."

That's a rather new insight. In the past, Mr. Buffett has suggested that a dividend almost certainly wouldn't be on the table until after he had given up the reins. I'm pretty sure that Mr. Gelb didn't utter the word "dividend," so Mr. Buffett introduced the idea of his own accord.

One issue with a potential dividend, he says, is that there is an expectation that a company won't cut it unless it faces problems.

But, he said, "if we felt that we had cash that was unlikely to be used in a reasonable period of time," the company would need to explore the options of how to return it.

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Right now, he says, "we are still optimistic enough about deploying the capital" that he doesn't want to do that. He acknowledged that "the burden of proof is definitely on us," but says that "history is on our side" in terms of deploying capital.

"I am sure that some time in the next 10 years...there will be markets where we can do intelligent things on a big scale," but he doesn't know when that might be. That time might be nine years away, and if that's the case, "there's no way I can come back to you three years from now" if Berkshire's cash pile is at $150 billion, and "tell you that's a good move."

Mr. Buffett says he doesn't like having that much money in his coffers, and "we shouldn't use your money like that" for a long period of time.

Click here to see the full live coverage of Warren Buffett at Berkshire Hathaway's annual meeting:

http://www.wsj.com/livecoverage/berkshire-hathaway-2017-annual-meeting-analysis

Write to Erik Holm at erik.holm@wsj.com

In response to a question about his investment managers, Ted Weschler and Todd Combs, Mr. Buffett takes the opportunity to praise them both effusively.

They each manage about $10 billion in investments for Berkshire, he says.

"I think they would agree that it's tougher to run $10 billion than it is to run one or two billion," he said. But "they've gone a good job at managing marketable securities. They've made more money than I would have."

He adds that Messrs. Weschler and Combs handle other responsibilities. Each investment manager has handled some deals for Berkshire and a few Berkshire companies report to them instead of to Mr. Buffett.

"The truth is, I've got more assigned to me that I can handle," Mr. Buffett said. "As proven by the fact that we've got this $90 billion-plus [in cash] around. ...If you told me I had to put it to work today, I would not like the prospect."

Click here to see the full live coverage of Warren Buffett at Berkshire Hathaway's annual meeting:

http://www.wsj.com/livecoverage/berkshire-hathaway-2017-annual-meeting-analysis

Write to Nicole Friedman at nicole.friedman@wsj.com

(END) Dow Jones Newswires

May 06, 2017 15:16 ET (19:16 GMT)