Warren Buffett - The Investment Guru
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Case Details:
Case Code : LDEN027
Case Length : 17 Pages
Period : 1970-2003
Pub Date : 2003
Teaching Note : Available
Organization : Berkshire Hathaway group of companies
Industry : Investment
Countries : USA
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts Contd...
A Critique of Buffett
Although many analysts admired Buffett for his shrewd business acumen and
investing abilities, others criticized him for his conservative approach to
investing. His critics pointed out that because of Buffett's adherence to
Graham's theories, he failed to invest in companies that could have fetched him
greater returns. In addition to his conservative approach to the stock market, Buffett attracted criticism on one more front
- his campaign for the
implementation of corporate governance in companies. Analysts questioned Buffett's advice on corporate governance to other companies when they pointed
out that Buffett's company Berkshire Hathaway did not have any outsiders as
directors on its board.
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Buffett was also criticized for his stance
against employee stock options and high CEO compensation packages in
the tech companies. Many insurance industry players were against
Buffett for his support towards the Federal Terrorism Insurance
fund.24 However, Buffett
defended his stance saying, “Nuclear attack would bankrupt the
insurance industry...
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The Future of Berkshire Hathaway
One factor that worries both Buffett's critics and admirers is the future of
Berkshire Hathaway after him. Analysts and media alike have often raised
this question. Buffett's answer to them was, "Look, this company is going to
outlast me for years to come. These businesses are going to run for 50
years. We have a great team of managers. They know how this company works.
It's pretty simple really."27 However, many
analysts don't agree with Buffett's viewpoint. They feel that the real
concern for Berkshire Hathaway is the allocation of capital. |
It will be difficult to find someone with the same capital
allocation skills that of Buffett has, which is the driving force behind the
growth of his company. Although Buffett announced that he had chosen his
successor to run Berkshire Hathaway, he did not make his decision public...
Exhibits
Exhibit I: Berkshire's Corporate Performance Vs. S&P 500
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