Berkshire Hathaway 1999 Annual Meeting Audience Question # 32

Analyst coverage won’t change Warren’s attitude towards Berkshire’s stock price or his philosophy about investor relations

Warren Buffett:

Zone 6.

Audience Member:

Good morning, Mr. Buffett and Mr. Munger. My name is Jeff Lilly from Denver, Colorado.

My question is as follows: over the last couple of years, I’ve read both of you quoted as not following the stock price on a day-to-day basis, not being terribly concerned about whether Berkshire is up or down.

You now have analyst coverage. Perhaps you requested it, or perhaps you acquiesced to it.

But my question is whether this reflects any change in your attention paid to the stock price or your philosophy about investor relations, and whether you think the analyst coverage is going to have any impact on the stock price going forward?

Warren Buffett:

Yeah, no. It reflects no change in our attitude toward stock price. I mean, we are concerned about building the intrinsic value per share of Berkshire at the highest rate we can, consistent with a couple of other principles that we’ve set forth.

And we hope very much that the stock price stays in a zone that is not too wide around intrinsic value… that there’s is going to be some zone of some sort, because intrinsic value itself is not precisely calculable. And in addition, you wouldn’t expect it to track it penny for penny.

But we don’t want it to go crazy in either direction in relation to intrinsic value.

When we made the deal with General Re, that attracted more analyst attention and institutional investor attention because General Re’s shareholder base was overwhelmingly institutional.

So, institutions had to decide whether they were going to continue with their investment or clean it out. And we knew we would end up with more institutional ownership, subsequently.

Alice Schroeder asked me, prior to the merger meeting, she said there were a group of institutions that were coming to the meeting, which I liked. I mean, the fact that they were serious enough about their investment to come and see what Berkshire was all about.

And a few of them even had a requirement, I think, from their own boards that they, at least, have sat down with management. So, we spent… or I spent an hour or so with a group that she had put together and they came to Omaha.

But that’s the last contact I’ve had with any institutional investor. And we will have no special meetings with institutional investors or anything. I mean, they are absolutely welcome to attend this meeting to get all of the information that’s dispensed.

I think it’s very useful, frankly, to have an analyst or two that is well-versed in Berkshire and that thinks straight and does their homework. And that’s a plus, because it means we don’t have to do it.

And in effect, that if institutions want to talk to somebody about it, they don’t call me. Because they’re not going to have much luck calling me. And they can call Alice or some other analyst that wants to do it.

And that’s perfect. We have a non-paid… it is not investor relations because that’s thought of somebody as sort of pumping your stock… but at least we have a information office now… a non-paid information office.

And you know, that goes along the grain of my nature.

And we… people say, “Do you want individual owners? You want institutional owners?” What we want are informed owners who are in sync with our objectives, our measurements, our time horizons, all of that sort of thing.

I mean, we want people that are going to be comfortable owning Berkshire, and we don’t want people who are owning it for reasons different… in a way different… that are different from our reasons for owning.

We don’t want people that are concerned about quarterly earnings. We don’t want people who are concerned about stock splits.

We don’t, you know… we don’t want people that need to be pumped up about the stock, periodically.

It’s just not of interest to us. Because it just means we have to keep living that way in the future. And it’s not the way we want to live now, it’s not the way we want to live in the future.

What we really want are a bunch of people, like we have in this audience, who sit down and read, and think and understand that they’re making an investment. It’s not just a little ticker symbol. They’re buying part of a business. They know what the business is all about.

They know how we think, they know how we measure ourselves. They’re comfortable with that.

And they can come in individual or institutional form. And when we get them, we like to keep them.

So there’s no change in our attitude about that. There is a change in coverage, in that we… there is some limited amount of coverage in Wall Street, which I guess for a company with a 110 or 20 billion of market value, there should be.

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