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Tuesday, March 19, 2013

THE WALL STREET JOURNAL: Warren and the Bear: Questions From a Berkshire Bear (We Bought on eBay)



WSJ
Inspired by Warren Buffett's invitation to  Berkshire Hathaway bear Doug Kass to attend the conglomerate’s  annual meeting, Deal Journal hunted down a Berkshire trinket, on eBay.
Here we present to our readers the Berkshire Bear. He sports the latest in Berkshire fashion, a lime-green shirt and a painting hat from Benjamin Moore, a Berkshire property.
But don’t be deceived by his supportive appearance. This bear comes armed with tough questions for the octogenarian investor. Here are his primary queries, and he’ll be disappointed if Mr. Kass doesn’t step up with similar fare.
1. You’ve said that your eventual replacement will come from among Berkshire’s managers. This limits options for Berkshire in that all of the Berkshire managers are human. Would you consider hiring a bear to run a Berkshire unit? Can you be sure that your replacement will continue to invite bears to the meeting?
2. On a related note, you’ve said that Berkshire’s sheer size means it has become much harder to invest nimbly enough to outperform the S&P. Bears are both large and nimble. Should a bear be the next CEO of Berkshire?
3. Mr. Buffett, you have said several times you are “hunting elephants.” What is your next target industry and is there a policy of killing and stuffing animals at this company?
3a. A follow-up: Would Benjamin Moore consider acquiring Behr paints? Asking for a friend.
4. Mr. Buffett, you’ve spent plenty buying up newspapers, an industry even you admit is struggling and seems to fall outside of this desire for big acquisitions. Does your valuation for the newly acquired newspapers anticipate improved results in the future? What other industries do you intend to challenge the bears on?
5. Berkshire’s managers send you profits from their companies so you can allocate capital as you see fit. Has your thirst for capital prevented Berkshire units like Dairy Queen or Nebraska Furniture Mart from realizing their full potential? Would those cubs be better off on their own, free from the mother Berkshire?
6. Geico spends about $1 billion on advertising and marketing annually, far more than any other car insurer. How does the company evaluate whether it is getting a good return on that investment? Could that return be improved by adding a charming Teddy Ruxpin-type character to your roster of mascots?
7. The website for Berkshire-owned clothing company Garanimals depicts a koala playing soccer. Everyone knows that koalas play rugby. Discuss.
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