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Berkshire Hathaway Inc. (BRK.A), International Business Machines Corp. (IBM): Here’s How Warren Buffett Disappointed Me

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The Berkshire Hathaway Inc. (NYSE:BRK.A) annual meeting is attended by throngs of Berkshire faithful. For some shareholders at the meeting, it’s probably impossible for Berkshire Hathaway Inc. (NYSE:BRK.A) CEO Warren Buffett to ever be wrong in their eyes. If we’re being realistic, though, Buffett does indeed have his slip-ups. As partner-in-crime Charlie Munger put it:

“Just because Warren thought something years ago doesn’t make it a law of nature.”

With that in mind, I rounded up the team of Fools who attended this year’s Berkshire Hathaway Inc. (NYSE:BRK.A) meeting to ask in what ways Buffett disappointed them during the meeting.

Brendan Mathews: Toward the end of the meeting, a shareholder asked about International Business Machines Corp. (NYSE:IBM)‘s moat. Warren basically sidestepped the question, saying he didn’t understand IBM’s moat as well as The Coca-Cola Company (NYSE:KO)‘s. According to Buffett, He likes IBM’s financial policies and thinks it will do well, but he feels more conviction in Coca-Cola, Wrigley, H.J. Heinz Company (NYSE:HNZ), and Burlington Northern Santa Fe.

Considering the size of Berkshire Hathaway Inc. (NYSE:BRK.A)’s investment in IBM, I hoped for a better answer. I wish he had directly addressed the question, and said something like this:

IBM is a technology business, but it is somewhat unique among technology companies. It has strong streams of recurring revenue from service and software contracts that can extend up to a decade. It has very strong relationships with clients, and it is, by nature of the business, very hard to switch vendors. These switching costs, in addition to IBM’s well-respected brand, gives IBM a unique amount of pricing power, and its earnings are much more reliable and predictable than with the average tech company.

Scott Phillips: There’s something a little strange about deigning to criticize the world’s greatest investor. He has more than 50 billion reasons (each of them a U.S. dollar) to suggest he’s probably got more right than wrong!

The man nominated to be the Berkshire “bear,” Doug Kass, attempted to make a bet with Buffett and Munger, effectively asking for $100 million of Berkshire Hathaway Inc. (NYSE:BRK.A)’s money, with which to prove he could beat the market by acting as a short-seller — with Kass’ fees going to charity in their entirety if he lost the bet. Before Buffett could answer, Munger gave a succinct “no.”

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