Berkshire Hathaway Inc. paid a lot for a stake in the venerable food giant Kraft Heinz Co. and did not know how to harness the potential of Amazon.com Inc. The company bought shares from the Internet retailer only after appreciating by thousands of percent.
This was the evaluation of Warren Buffett and Charles Munger in two recent bets, leaving them in an unusual position on Saturday: answering shareholder questions on whether changes in the investment approach are necessary that have made them a legend.
At Berkshire's annual meeting in Omaha, Nebraska, investors were passing a Kraft Heinz Co. booth with a bottle of inflatable ketchup and a giant hot dog. The dolls served as a reminder of a poor bet made by Buffett, 88, and questions about whether traditional consumer brands still carry weight in the age of Internet stocks, such as Berkshire's latest investment.
Investors wanted to know what Berkshire companies are doing to avoid the risk of the world changing at a faster rate than the conglomerate can react. For some, strategic issues reminded the days before the dot-com bubble burst or the financial crisis.
"They remained relevant during many changes in their careers"said Richard Cook, who manages $ 335 million, including Berkshire shares in Cook & Bynum Capital Management. "He's agile enough and now he understands that many of these brands are under pressure and are no longer as resilient as they were."
Buffett has long sought companies with "moats", that is, a long-term competitive advantage. When asked about new technologies and about Amazon, the billionaire investor recognized the changing trends and said that their managers had the mission to stay ahead of the curve.
"The world will change dramatically"said Buffett, president and CEO of Berkshire. "Just think of how much that has changed in the 54 years we've had Berkshire, and some of those changes have hurt us"He said, citing the textile business and some footwear operations that bear the same name.
"But we adjust and we have a group, in general, of very good business"Buffett said. "We have some who will succumb to what happens in this world, but I am still a convinced capitalist and I think that's a good thing."