Buffett soothes shareholders at Berkshire fest

By Jonathan Stempel and Svea Herbst-Bayliss

OMAHA, Nebraska (BestGrowthStock) – Warren Buffett went a long way to convincing tens of thousands of shareholders and others attending Berkshire Hathaway Inc’s annual meeting that his $5 billion bet on Goldman Sachs Group Inc is a keeper.

The Goldman investment, made in September 2008, was a main area of focus at Berkshire’s annual meeting this weekend. Buffett opened the meeting with an unusual, forceful, roughly half-hour defense of Goldman’s business practices, and the bank’s role in a mortgage transaction that is the focus of a U.S. Securities and Exchange Commission fraud lawsuit.

“I didn’t really expect Warren to come down on the other side,” said Matthew Ghali, 36, a software technology manager from San Francisco attending his first meeting and who owns 50 Berkshire Class B shares. “But at the same time, I don’t think it came across as disingenuous. It was a completely reasonable transaction. There were sophisticated investors involved.”

The meeting itself drew investors from around the world. People started to line up outside the Qwest Center Omaha before 3 a.m. to get a good seat to listen to Buffett, the world’s third-richest person, and his longtime partner-in-arms, Berkshire Vice Chairman Charlie Munger.

“I’ve traveled all this distance, I want to make sure I get a great spot,” said Tony Russell, 52, a stockbroker from Brisbane, Australia, who lined up at 4:10 a.m. for his first meeting. He said he owns Berkshire because it owns some 80 businesses, and “as a resident of Australia, I can get exposure to a recovering U.S. economy.”

The meeting was far more upbeat than last year’s, when stocks were depressed, U.S. bank “stress tests” loomed, and a swine flu epidemic beckoned.

Even before the meeting in an exhibit hall, Buffett was in good spirits, lighting up like a kid in a candy store as a model train from Berkshire’s newly acquired Burlington Northern Santa Fe unit drove by. “Oh, look at that!” he exclaimed.

GOLDMAN

At the meeting, Buffett said the existence of the SEC lawsuit alleging that Goldman misled investors was not evidence that the company violated his ethical standards, or warranted that Berkshire sell its lucrative investment that throws off $500 million of dividends a year ($15 a second).

He said, rather, that it is up to investors to do better due diligence, and not to worry about the motives of parties on the other side of a transaction. “If they told me (Federal Reserve Chairman) Ben Bernanke was on the other side of the trade, it wouldn’t make a difference,” Buffett said.

“He took off the table what the allegations are, and then repositioned the whole conversation as to what the nature of the transaction was,” said Rahul Aggarwal, 38, a managing director at Gracie Point, a New York finance firm, who said he does not own Berkshire shares but plans to make them a “core holding” of his portfolio. “The whole crowd went, like, ‘Yeah, that’s right, this is a good way of looking at it.’ With it reframed, Goldman was effectively off the hook.”

Because Berkshire is well-diversified, owning some 80 businesses and dozens of stocks, and run by arguably the world’s most famous investor, many shareholders do not gauge the value of Berkshire as an investment by a single holding, in this case Goldman.

While some shareholders interviewed after the meeting had trouble explaining Buffett’s defense of Goldman, others said Buffett framed the controversy in down-to-earth terms.

“I really felt like I could understand everything he said, from Goldman Sachs to financial regulation,” said Jan Anglin, 57, who described herself as a homemaker from St. Louis. She and her husband own Berkshire A and B shares, she said.

TRANSPARENCY NEEDED

Not everyone was convinced that Goldman deserves to be let off the hook, despite Buffett’s defense.

“I still think something’s fishy,” said Cindy Beverley, a 50-year-old Realtorfrom Worth, Illinois, attending her first meeting and who bought 50 B shares this year. “Warren’s view was that they didn’t do anything different than he’s done with Berkshire…. I don’t know that I was convinced.”

But she added that “someone isn’t guilty until proven innocent, it’s the other way around.” As to the meeting, she said: “Loved it, loved it, loved it. I had a feel for Warren and Charlie before, but more so after we went to the meeting. They seemed like real down-to-earth guys.”

After the meeting, hundreds of Berkshire shareholders, friends and families at a time lined up outdoors at Berkshire’s Nebraska Furniture Mart for the “Berkyville Picnic,” where they could pick up a pulled pork sandwich, chips and a cookie. Cost: $5. Many were in good spirits.

“We’re more conservative: we’re looking for honesty and everything that we’ve been through in the last year-and-a-half,” said Paula Olson, 51, a registered nurse from the Omaha suburb of Papillion attending her first meeting. “We need some transparency, and we’re not getting it from the government, so maybe we can get it from Warren.”

She said her son owns 10 Berkshire B shares, but that she owned none. Yet. “I plan to buy some shares Monday,” she said,

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(Reporting by Svea Herbst-Bayliss and Jonathan Stempel; editing by Martin Golan)

Buffett soothes shareholders at Berkshire fest