Category: Warren Buffett

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Kraft Heinz Warren Buffett

Kraft Heinz Slashing Ad Agency Dollars as Part of Cost Cutting

(BRK.A), (BRK.B)

Newly formed Kraft Heinz is looking to change the way it produces its advertising, as part of its goal in wringing $1.5 billion in annual savings out of the combined company.

After merging on July 2, 2015, Kraft Heinz is now third-largest food and beverage company in North America and ranked number five world-wide. The company has eight $1 billion+ brands.

The merger left Heinz’s ad agency out in the cold. In late August, management shifted the Heinz accounts that had been handled by Interpublic’s UM to Kraft’s agency Starcom MediaVest Group’s Starcom. In addition, Kraft Heinz is now reviewing all of its creative accounts, according to Ad Age.

Ad Age reports that all the creative agencies have been asked to provide information and those chosen will be responsible for creative ideas, but will no longer provide the actual production of the ads, which will go directly to production houses.

Cost-Cutting Across the Board

Kraft Heinz’s chief executive Bernardo Hees is a partner in 3G Capital, which teamed with Berkshire Hathaway take over both companies and merge them together. He came to the helm of the combined company after a stint as the chief executive at A.J. Heinz where he slashed 7,000 jobs and brought a tight-fisted approach that made no expenditure too small to be examined.

At Heinz, Hees imposed cost controls big and small that include cuts to travel expenses, limits on the number of printer copies that can be made each month, the elimination of snacks in break rooms, and new mandates on cutting electricity usage. After assuming the helm of Kraft Heinz he immediately cut 2,500 jobs in his first week.

Among the management changes Hees has made was the appointment of Nina Barton to Senior VP of Marketing Innovation, Research and Development. Ms. Barton first joined Kraft in 2011 and was most recently the VP of Marketing for Coffee. She reports directly to George Zoghbi who was appointed Chief Operating Officer of U.S. commercial business.

Gone were Tom Bick, who was Heinz’s senior director-integrated marketing communications and advertising for the Oscar Mayer business, and Kara Henry, who was Heinz’s senior marketing director, communications and agency relations.

Warren and Charlie Agree

Warren Buffett and Charlie Munger’s have both supported Hees’s approach, believing that these legacy food companies, which both date back to the 1800s, need cost-cutting to be competitive in the 21 century.

“3G has been buying businesses that have too many people,” Buffett explained at the 2015 Berkshire Hathaway annual meeting. “You will have never found a statement from Charlie or me saying that a business should have more people than needed.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Commentary Warren Buffett

Commentary: Is there Money for Berkshire in an A-B InBev Merger with SABMiller?

(BRK.A), (BRK.B)

As soon as the news hit that a megamerger was in discussion between Anheuser-Busch InBev and SABMiller, my first thought was “Is there money to be made for Berkshire?”

There sure is.

A merger of Anheuser-Busch InBev and SABMiller would create a $275 billion company, and would need somewhere around $100 billion in financing to complete the deal.

With Anheuser-Busch InBev controlled by Brazilian private equity firm 3G Capital Management, it would be logical that such a mammoth deal could use at least some financing from Berkshire Hathaway.

The companies previously collaborated on 3G’s Burger King takeover of Tim Hortons, and 3G and Berkshire’s worked jointly to takeover A. J. Heinz, and later to merge it with Kraft Foods Group.

Berkshire and 3G clearly like working together because each provides half of a winning formula. Berkshire produces a lot of cash that needs to be put to work, and 3G is an acquirer of large-scale, high quality assets for which it provides management that aggressively wrings out savings that flow back to shareholders.

Any takeover by Anheuser-Busch InBev of SABMiller is sure to face antitrust issues, as the combined company would own 30% of the global beer market, but if it could get by regulators, here’s what to expect.

Preferred Stock Financing

For the past decade, Warren Buffett has especially used the issuance of preferred shares that pay Berkshire a fixed dividend in exchange for billions in financing.

Buffett’s love of preferred stock financing provided much needed cash to Goldman Sachs, Wrigley, and Bank of America during the Great Recession, and more recently helped 3G finance its Burger King/Tim Hortons merger and the A. J. Heinz and subsequent Kraft Heinz deals. In each deal, Berkshire ended up receiving juicy dividends that ranged from 6% in the case of Bank of America to 9% with Burger King/Tim Hortons.

Common Stock for Berkshire

An Anheuser-Busch InBev/SABMiller merger would likely give Berkshire a sizeable common stock position as well. For example, in providing financing for 3G’s Burger King takeover of Tim Hortons, Berkshire received warrants for 8,438,225 shares of the new combined company, Restaurant Brands International Inc., for a penny a share. The warrants came attached to 68,530,939 Class A 9.00% Cumulative Compounding Perpetual Preferred Shares, and gave Berkshire 4.18% of the outstanding Common Shares and 14.37% of the total number of votes attached to all outstanding voting shares of the Corporation.

Berkshire as the Linchpin

With 3G’s Burger King merger, Berkshire provided roughly 25% of the financing and was the linchpin that quickly brought other financing to the deal. When Warren Buffett wants in, others surely follow.

Look for Berkshire to take a portion of any Anheuser-Busch InBev and SABMiller deal if regulators ever allow it to happen.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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NetJets Warren Buffett

Pilots’ Union Set to Resume Picket of NetJets

(BRK.A), (BRK.B)

Sometimes a familiar face is not enough to bridge a labor contract dispute.

The NetJets Association of Shared Aircraft Pilots (NJASAP) has set September 10 as the date to resume picketing NetJets at seven airports. The resumption of picketing reflects the union’s frustration with its lack of progress in getting a new contract.

NetJets pilots have been working without a contract since the prior agreement expired in 2013.

A Familiar Face Returns

On June 1, Berkshire Hathaway, the owner of NetJets, fired NetJets’s chief executive and chairman Jordan Hansell. Hansell was replaced with Adam Johnson, who had spent 22 years at NetJets.

At the time, NJASAP was positive in the change in NetJets’s leadership.

“Newly appointed CEO Adam Johnson and COO Bill Noe bring much needed experience in both operational and labor relations to their respective positions. Union Leadership looks forward to engaging the new team: We hope they share our goal of rebuilding a once progressive labor management relationship. Similarly, Union Negotiators remain ready and willing to work with senior management to bring contract negotiations to a successful conclusion on behalf of our pilots.”

Unfortunately, after a 90-day summer ceasefire, the union is ready to resume its picketing, noting that the union and management are still far apart.

Johnson has pointed to the “remarkable” progress the two parties have made, but notes, “due to the parties’ views about the economics of this business — and thus how much additional cost we can take on over the next decade — as well as different expectations concerning the demand for the services we provide.”

NJASAP is seeking a 35% pay increase over three to five years. Currently, its captains with 10 years of experience earn $131,179 a year.

Words of Wisdom from Warren

“It’s human nature to sometimes have differences about how people get paid,” Berkshire chairman Warren Buffett said, when questioned about the dispute at the 2015 Berkshire Hathaway annual meeting.

Unfortunately, those differences don’t look any closer to being resolved.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Kraft Heinz Warren Buffett

No More Elephants For Buffett’s Famed “Elephant Gun,” For Now

(BRK.A), (BRK.B)

Warren Buffett likes to refer to his hunting for big companies, such as his acquisition of BNSF Railway, and the recently announced Precision Castparts Corp., as hunting for elephants with his “elephant gun.”

While each year Berkshire does on average $3 billion of bolt-on acquisitions for its various companies, it takes something really elephant-sized to move the needle on a conglomerate with a market value of a third of a trillion dollars.

Those kinds of deals, be they BNSF, Kraft Heinz, or Precision Castparts, also mean that the Buffett’s elephant gun will be quiet while he refills the cash coffers. Berkshire is spending down its $66 billion in cash by $20 billion, and Buffet likes to maintain at least $20 billion in cash as a reserve in the case of economic downturns.

Buffett Reloads the Cash

“This takes us out of the market for an elephant but we will probably be buying a few small things in the next 6 months,” Buffett recently remarked, explaining the deal for Precision Castparts. “We are in negotiations on a couple but in terms of a deal of similar size it pretty much takes us out. What we will probably do on this one, we will probably borrow about $10 billion and use about $23 billion of our own cash on that order. We’ll be left with over $40 billion probably in cash when we get all through. But I like to have a lot of cash at all times, so this means we have to reload over the next 12 months or so, but it doesn’t preclude doing smaller deals, but we will be doing a few probably.”

That’s The Way The Cookie Crumbles

So, despite the recent excitement around activist investor Bill Ackman of Pershing Square having taken a $5.5 billion stake in snack food company Mondelez, perhaps with the goal of seeing it sold to a buyer like Berkshire, don’t look for it to merge into either Berkshire or Kraft Heinz any time soon.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Precision Castparts Warren Buffett

Is Berkshire Getting Precision Castparts Too Cheap?

(BRK.A), (BRK.B)



Did Berkshire Hathaway pay too much when they agreed to pay $37.2 billion for aerospace parts manufacturer Precision Castparts?

That seems to be the Wall Street consensus based on the way the stock price has sagged a bit. Analysts slammed the deal, proclaiming that unlike the 2009 takeover of BNSF Railway this is a case of buying at the top of the market, not the bottom.

Buffett Agrees

While Warren Buffett doesn’t believe he is paying too much, after all, he’s buying a company Berkshire plans to still own in a hundred years, he has acknowledged, “This is a very high multiple for us to pay.”

Not So Fast

While almost everyone thinks the price is too high, Georg H. Krijgh of the G.H. Krijgh Guardian Fund, a private partnership based in the Netherlands, thinks it is way too low, and that Buffett has pulled a fast one again.

In a letter to Precision Castparts’ Board of Directors he states:

“Precision Castparts is the largest investment of our fund. We believe that the true value of the company is far in excess of the USD 235 per share offer by Berkshire Hathaway. In our view:
1. An independent Precision Castparts is worth at least USD 40 billion.
2. Berkshire Hathaway is not paying an appropriate premium.
3. Accepting the USD 235 per share offer is not in line with the fiduciary duty of the Board of Directors.
4. We will vote against the proposed sale.

We believe that the PCC Board of Directors is leaving significant value on the table.

We expect earnings of USD 2 billion

First, Mr. Buffett is telling the media that the multiple is high. This might be true based on 2015 earnings but it is incorrect when using future expected earnings and free cash flow. Current earnings are temporarily under pressure due to lower volumes in energy markets. PCC’s aerospace business is much less cyclical than widely believed and the ramp-up of several programs such as the Boeing 737 MAX, A320neo and the H-class turbines is likely to significantly increase earnings per share in the next few years even when energy markets remain weak. Mr. Donegan confirmed this in several recent earnings calls. We believe that free cash flow will grow to USD 2 billion annually.

Multiple of at least 20 times

Second, PCC deserves a high multiple because it has a tremendously strong market position, which is clearly visible by the continuously high return on equity. It is the low-cost and often sole-source provider of mission critical components in a secular growth market, a leader in metallurgical technology, owner of intellectual property and strategic assets such as TIMET and has a strong balance sheet. Especially in these times of low interest rates, PCC deserves a multiple above 20 times earnings. PCC is worth at least USD 40 billion.”

More From Krigh

“Berkshire Hathaway is offering a normal multiple on depressed earnings. Mr. Buffett, whom we greatly respect, and his team have a reputation of finding companies that are not aware of their true fair value. A case in point is Berkshire Hathaway’s takeover of Burlington Northern in 2009. He bought the railroad just before the economy and earnings rebounded. In 2009, shareholders may have been distracted by the credit crisis. Currently, there is no reason to sell for a low price in a hurry. The quoted 21% premium is based on a short-term dip in the share price. For many days during the past year the share price was trading above USD 220, a 6% discount to the offer price.”

Is There Really A Premium?

Krigh cites Precision Castparts’ own stock repurchases to question whether Berkshire is even paying a premium for the stock at all in light of the stock’s 52-week high of $249.12 being above Berkshire’s offer of $235 per share.

“During the past two years, the Board of Directors approved and executed share repurchases at prices around Berkshire Hathaway’s offer price. A significant part of the buybacks seems to have occurred at an average price above USD 230. It is puzzling why you are willing to buy Precision Castparts shares at this price and at the same time sell full control of the business at the same price. In addition, in 2014 and 2015, Berkshire Hathaway bought additional shares of PCC for a price between USD 200 and USD 240. You are aware that they are intelligent investors and only buy when the intrinsic value is significantly higher than the price. This confirms the fact that the USD 235 per share offer is too low.”

So, is Berkshire paying too much or too little? Only time will tell, but when you plan to own something a hundred years or two, it will probably look like quite a bargain at some point.

For Berkshire shareholders alive today, here’s hoping that the bargain is now.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Acquisitions Precision Castparts Todd Combs and Ted Weschler Warren Buffett

A Big Win for Todd Combs

(BRK.A), (BRK.B)

While Warren Buffett gets all the attention for pulling the trigger on Berkshire Hathaway’s biggest deal to date, the $37 billion acquisition of Precision Castparts Corp. It was Todd Combs that first brought the company to Buffett’s attention. Combs took his first position in Precision Castparts three years ago, and at the time of the announcement of Berkshire’s takeover, the stake had grown to 3% of the company.

That the biggest acquisition in Berkshire’s history comes because one of his portfolio managers clearly pleases Buffett. “You have to give Todd Combs credit for the deal,” Buffett said on Monday, noting that he had never heard of the company before Combs brought it to his attention. ”Todd told me a lot about it, and over the last few years I have become familiar with it,” he added.

It wasn’t until Precision Castparts’ CEO and Chairman Mark Donegan visited Berkshire, when he was making the rounds visiting some of the large shareholders, that Buffett got interested in making a bid for the leading aerospace manufacturer.

The Dynamic Duo

Five years ago, Buffett hired stock-pickers Todd Combs and Ted Weschler, entrusting each one with a billion dollar portfolio. He placed no restrictions on what they could buy, and he has purposely stayed away from back seat driving. As Buffett’s confidence has grown in the two portfolio managers, he has increased the size of each of their portfolios, which now sit at around $9 billion.

Todd Combs, a Columbia Business School graduate and the former head of the hedge-fund Castle Point Capital, was hired by Buffett in October of 2010. He made a name for himself when Castle Point had an annual return of 34%.

Ted Weschler, who came on board at Berkshire in September of 2011, is a graduate of the Wharton School, and was a partner in Peninsula Capital Advisors, LLC.

A Path Forward for Berkshire

Clearly, whoever assumes the reins at Berkshire post-Buffett now has excellent managers to handle its $100 billion-plus stock portfolio, which includes such blue chip stocks as Coca-Cola, America Express, and Wells Fargo. And, since the biggest job that Berkshire’s CEO has on his plate is capital allocation, both Combs and Weschler also offer another way for the next CEO to identify worthy companies to add to the conglomerate.

The latest one, Precision Castparts, is a big win for Todd Combs, and a big win for Berkshire.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Warren Buffett

China’s Stock Market Retreat Proves Buffett Right

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China’s stock market has rocketed upward in 2015, with China’s domestic equity markets having more than doubled, but its recent 20-percent retreat brings to mind Warren Buffett’s recent words on whether traditional value investing has a place in such a market.

“Investment principles do not stop at borders, Buffet noted at the 2015 Berkshire Hathaway annual meeting. “I would apply the principles of the Intelligent Investor—stocks as prices of a business—in evaluating businesses overseas.”

With China’s high-flying stock market increasingly built on borrowed money, with margin debt at a record 8% of the stock market’s free float, Chinese investors may be wise to heed another one of Buffett’s famed aphorisms.

“Only when the tide goes out do you discover who’s been swimming naked.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Commentary Special Report Warren Buffett

Berkshire Hathaway’s Biggest Question

(BRK.A), (BRK.B)




Who will succeed Warren Buffett, who turns 85 in August, as the head of Berkshire Hathaway? This would seem to be the biggest question hanging over the shareholders of the massive conglomerate. Will it be Greg Abel, the head of Berkshire Hathaway Energy, or Ajit Jain, who heads up Berkshire’s reinsurance business? Both are frontrunners, especially since Vice-chairman Charlie Munger, who is himself 91 this year, specifically dropped their names in his shareholder letter included in the 2014 Berkshire Hathaway annual report. Yet while people speculate on Buffett’s successor, I would suggest there’s a far more important question. After all, CEOs come and go, and whoever follows Buffett and Munger will eventually be succeeded by others.

So, the biggest question is not who will succeed Buffett; it’s how will they be compensated. In other words, how will they participate in the growth of the company as compared to how has Buffett participated?

Can a unique situation be replicated?

Berkshire Hathaway may be unique in the sheer number of companies that operate under its umbrella. It’s not only a conglomerate; it’s a conglomerate of conglomerates. For example, Berkshire’s Marmon Group has 160 independent manufacturing and service businesses, and Berkshire’s Scott Fetzer Group oversees 21 diverse companies. But even this is not what is most unique about Berkshire. What’s most unique is that Warren Buffett is participating first and foremost just as you do, as a shareholder.

The most underpaid CEO in the Fortune 500

For a man overseeing a conglomerate with a market value of roughly $347 billion, you would think that Buffett receives sky high compensation, especially since that conglomerate’s share value has risen 1,826,163% (yes, that’s not a misprint) from 1966 to 2014. However, Buffett (and Charlie Munger) have annual salaries of only $100,000. What’s more, there are no stock options and no bonuses. Buffett and Munger’s rock bottom salaries mean that they are participating in Berkshire just like you are, as long-term shareholders that care more about increasing the underlying intrinsic value of the company than any short-term trick to boost the stock price.

Think that doesn’t matter?

“The more CEOs are paid, the worse the firm does over the next three years, as far as stock performance and even accounting performance,” notes Michael Cooper of the University of Utah’s David Eccles School of Business. Prof. Cooper co-authored a paper that proved just that.

Just look at David Zaslav, CEO of pay-TV channel Discovery Communications. Zaslav had a total compensation package of $156.1 million in 2014, yet the same year the stock lost a quarter of its value, even as the broader market boomed. The shareholders felt the pain, while Zaslav got the gain. That’s not exactly participating on the same basis.

At the 2015 Berkshire annual meeting, Buffett acknowledged that when CEO incentives get out of line with a company’s goals bad things can happen.

“Charlie and I believe in incentives, Buffett said. “But we have seen decent people get into trouble with incentives. The CEO promises a certain number, and his executives don’t want to make the CEO look bad. Egos get involved. You have to be careful in the messages you send as CEO. If you don’t want to disappoint Wall Street, your managers will react.”

A Hedge without the 2 and 20

Hedge fund managers built their fortunes on the 2% annual management fee and a 20% of the profits, but that’s not necessarily the same for the hedge fund’s investors, who don’t get that management fee to cushion any tumble in profits. Remember in 2008 when Buffett bet hedge fund manager Ted Seides that a low-priced index fund tracking the S&P 500 would beat the average of any 5 hedge funds over a 10-year period that Seides picked? Well, the “Million-Dollar Bet” is looking more and more like a sure bet for Buffett, because he knew the high friction costs would hurt the hedge funds’ returns.

In fact, Berkshire’s a conglomerate that operates as hedge fund without the management fee structure. Like a hedge fund, it can buy 100% of a company (unlike a mutual fund), it uses derivatives to increase its leverage and hedge its risk, and because its leadership is in lock step with its investors, all that benefit goes right to each shareholder.

Whose side will they be on?

In 2011, David Sokol, who once looked like the heir apparent to Buffett, abruptly resigned after it turned out that he had accumulated over 96,000 shares of Lubrizol before bringing the company to Buffett’s attention as a potential acquisition. Buffett later called Sokol’s actions “inexplicable” and “inexcusable,” and while the SEC dropped its probe, the Sokol fiasco showed that’s it’s not automatic that Berkshire’s leadership will align with its shareholders interests.

Or, as Charlie Munger has said, “Trustworthiness is more important than brains.”

Berkshire’s Future Leadership

Berkshire’s future generations of leadership may be great stock pickers, able to build portfolios that equal the $100 billion portfolio that Buffett built. They may be great capital allocators like Buffett, able to use the profits from one company to by other companies with even greater growth potential. They might even be as savvy opportunists, unleashing Berkshire’s mountains of cash just when others credit has dried up. However, the big question is whether they do it on the same basis as Buffett and Munger, on behalf of all the shareholders.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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BNSF Warren Buffett

Warren Buffett’s Scolding of BNSF Brings Results

(BRK.A), (BRK.B)

“Praise by name and criticize by category,” Warren Buffett is famed for saying, and it was the rare exception when Buffett called out BNSF Railway for its delivery delays over the past year.

“BNSF disappointed many of its customers,” Buffett wrote in his annual letter to shareholders.

BNSF didn’t just disappoint customers, in some cases it lost them to rivals such as Union Pacific, as record crop numbers put the agricultural needs of Midwest farmers on a collision course with crude producers in the Bakken formation.

It’s no small matter, as last year BNSF moved nearly 1 million carloads of grain and other agricultural products.

With the latest over all year-to-date carload numbers showing a very positive 4.39-percent increase, BNSF has clearly taken Buffett’s marching orders seriously. The railroad’s $5.5 billion in infrastructure investments that it made in 2014 has started to pay off. The improvements included $400 million of track improvements in North Dakota alone.

Improvements By the Numbers

It’s in the grain carloads where there is particularly good news. Year-to-date carloads rose 14.8-percent to 191,060 from 166,425 in the 2nd quarter of 2014.

Last week, the news continues to improve, and there were only 144 outstanding grain carloads from May 9-12 in North Dakota versus 7,200 outstanding grain cars during the same period last year.

“We have substantially better AG shuttle turns per month as compared to last year,” a BNSF official told me at the Berkshire Hathaway annual meeting. “Last year we were below 2 turns per month, and now we are over 2.5 turns per month.”

BNSF is continuing to improve its operations, committing a record $6 billion to its Capital Plan for 2015. The amount is the most ever spent by a railroad in a given year.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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Charlie Munger Warren Buffett

No Threat of Activist Investors Attacking Berkshire

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Activist investors have been giving companies a hard time lately, accumulating large blocks of stock as a way of forcing their way onto corporate boards, and often forcing companies to “raise shareholder value” through spin-offs and special dividends as their price to go away. Just this week, DuPont defeated activist investor Nelson Peltz, and his Trian Fund Management, L.P.

Some consultants even advise corporations to settle with activist investors early, rather than trying to fight them.

Is Berkshire Hathaway vulnerable to what used to be called “greenmail”?

Not according to Warren Buffett and Charlie Munger. They both scoffed at the idea while answering questions at the Berkshire Hathaway annual meeting on May 2, 2015.

As Buffett sees it, at a valuation of over a third of a trillion dollars, Berkshire is too big to be threatened by activist investors.

“The market value of Berkshire is going to be so great that, even if all the activists got together, they couldn’t do much about it,” Buffett explained. He added that he would invite them in, as their attempts to attack Berkshire would merely drive up the stock price.

“We should be a place where people dump their activists, because there not going to get anywhere,” Buffett said wryly.

While activist investors bill themselves as needed financial warriors that shake up hidebound companies to unlock value for all shareholders, Charlie Munger wasn’t having any of it.

“I don’t think it’s a great age, this age of activism,” Munger said. “It’s hard for me to think of many activists I want to marry into the family.”

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.