We're coming to you live from the 2014 Berkshire Hathaway (NYSE: BRK-B ) (NYSE: BRK-A ) annual shareholder meeting in Omaha, Nebraska. We are transcribing the famous Buffett and Munger Q&A and live chatting with Fools around the globe! Click HERE to access this free live chat!
"Berkshire is so big, it can't do anything to move the needle anymore."
That's the narrative most Berkshire Hathaway "bears" have been peddling for decades. But Buffett and team have continued to prove them wrong.
Past doubters have been so wrong because many attempt to judge Berkshire Hathaway's future by only considering its past methods.
Even though many things in Buffett's personal and professional life have remained consistent (heck, he still lives in his modest suburban home he bought in 1958), Buffett has always adjusted his approach to fit the changing dynamics of his business.
In 1987, investments as a share of Berkshire’s total assets sat at 87%. Today, that number sits at roughly 1/3.
A younger Buffett with less capital to allocate preferred capital-light businesses with high returns on invested capital. Today, much of Berkshire's business relies on capital-intensive business railroads and energy utilities.
Whether you notice it or not, Buffett does change. And now the next change may be afoot.
In February 2013, Buffett teamed up with private equity firm 3G Capital to acquire Heinz. The deal was a slight departure from Buffett's historical deals; Berkshire took a 50% equity stake and purchased a $8 billion preferred stake that pays Berkshire a 9% coupon.
3G Capital, known as fierce cost-cutter, is running the overhaul of the operations at Heinz, and Buffett's comments in his letter to shareholders said the early results were "encouraging." He went a step further during today's Q&A session. Buffett said 3G does a "magnificent job of running a business" and that Berkshire is "very likely to partner with them again."
While 3G Capital aims to revamp company operations, Berkshire has long been known a "friendly" acquirer that usually allows existing management to continue running the show with very little interference. Future partnerships with 3G could allow Buffett and team to participate in deals that require a bit of shakeup, keep their friendly acquirer reputation, and reap the benefits of the potentially more profitable operations.
Buffett was still quick to note that they do not intend to mix 3G alumni into existing subsidiaries because Berkshire promised them a certain level of independence and most of those managers are already running lean operations.
Buffett's openness to future partnerships should give shareholders confidence that the 83-year old Oracle is still finding new ways to drive his massive company forward.
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