Berkshire share gains may offer Buffett cover at annual meeting

Thu May 1, 2014 1:08am EDT
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By Luciana Lopez

OMAHA, Nebraska (Reuters) - A ho-hum stock market so far this year may be just what Berkshire Hathaway (BRKa.N: Quote)(BRKb.N: Quote) shareholders needed.

As they gather this week at the sprawling conglomerate's annual meeting in Omaha, Nebraska, and rub shoulders with its iconic chairman, Warren Buffett, the fact that its shares are once again beating the broader market should help dim the sour memory of its recent run of underperformance.

Last year, for the first time in nearly half a century, the gain in Berkshire's book value over five years - Buffett's preferred measure of performance - lagged the total return of the S&P 500 .SPX.

Buffett himself concedes his company is just not built to run neck and neck with the kind of raging bull market that produced a 128 percent total return for the S&P from the end of 2008 through 2013. Berkshire, which saw its net worth grow just 91 percent by comparison in that run, does best in a weak market - the weaker the better, perhaps.

"For impressive outperformance you need a crisis," said Meyer Shields, an analyst with Keefe, Bruyette & Woods Inc.

"He's a headline investor," said Michael Yoshikami, chief executive of Destination Wealth Management, who owns about $18 million of Berkshire's class B stock. "If bad news comes, he's looking."

So with the S&P delivering a return, including reinvested dividends, of just 2.5 percent through the first four months of 2014 - and less than 2 percent on price alone - the 8.7 percent gain in Berkshire shares should provide shareholders some comfort.

More importantly for Buffett, it could also offer him some cover as he hosts the company's annual meeting in Omaha on Saturday, even though he will still face questions about how well the company can do going forward and why, at 83, he still hasn't named a successor.   Continued...

A billboard welcoming Berkshire Hathaway shareholders, displays a vintage picture of Chairman Warren Buffett (L) and Vice Chairman Charlie Munger, at the company's annual meeting in Omaha May 4, 2013. REUTERS/Rick Wilking