When I was asked to write this piece for our ongoing series on Berkshire Hathaway Inc. (NYSE:BRK.B)'s annual meeting, I struggled to come up with seven legitimate reasons to sell the Omaha, Neb.-based company. After thinking it over, however, I believe I've drawn up a list of factors that fits the bill. To be clear, there's little about Berkshire Hathaway Inc. (NYSE:BRK.B) that leads me to believe it's a "sell" right now. But that's not to say this won't change in the not-too-distant future.
1. Warren Buffett If Buffett had it his way, he'd probably run Berkshire Hathaway Inc. (NYSE:BRK.B) forever. But he doesn't. And in last year's annual letter to shareholders, the Oracle of Omaha assured investors that the board of directors has not only picked a successor ("an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire") but that they've identified two "superb backup candidates" as well.
This may be so, but the fact remains that Berkshire Hathaway Inc. (NYSE:BRK.B) won't be the same without Buffett. Aside from his ethereal ability to grow and manage an increasingly massive conglomerate, Buffett has become a magnate for deals. When Solomon Brothers fell on hard times, who'd they call? When Long-Term Capital Management nearly imploded, Buffett was among the first to offer assistance. And when Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) needed to reassure the market of their respective solvencies, it was Buffett who came to the rescue.
The point is that people go to Berkshire Hathaway Inc. (NYSE:BRK.B) because of Buffett. This is equally true for companies that are looking to sell as it is for companies like Goldman Sachs Group, Inc. (NYSE:GS) and Bank of America Corp (NYSE:BAC) that simply need a temporary stamp of approval. And, in return, Buffett ensures that Berkshire Hathaway Inc. (NYSE:BRK.B) is more than adequately compensated for any offer of assistance.
2. Size Success can be both a blessing and a curse. The blessing comes on the way up, as companies establish themselves, gain momentum, and grow at spectacular rates of speed. But at some point, they become so large that the growth rate necessarily decelerates. We've seen this with the greatest of American companies recently, including Chipotle Mexican Grill, Inc. (NYSE:CMG) and Apple Inc. (NASDAQ:AAPL). And Berkshire is no exception.
What started as a modest textile business has grown into one of the largest industrial conglomerates in the world. It's the fifth largest publicly traded company in the United States by market capitalization, behind only Exxon Mobil Corporation (NYSE:XOM), Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), respectively. In his most recent letter to shareholders, Buffett acknowledged the pressure this puts on Berkshire's growth through acquisition strategy: "Because of our present size, making acquisitions that are both meaningful and sensible is now more difficult than it has been during most of our years."