Buffett's flock praise the golden goose

0 Comments | Oakland Tribune, May 2, 2004 | by Joseph B. Treaster, New York Times

OMAHA, Neb. -- In 1978, Bill Scargle bought his first stock in Berkshire Hathaway, the conglomerate built by Warren Buffett, at $175 a share. Today, the stock is trading at an astounding $93,390.

Scargle, a career clerk in the brokerage business from Orinda, sold about $1 million of the stock to secure his retirement 15 years ago when it was trading at $7,000 a share. But he still has several million dollars' worth, he says, and he savors his good fortune every day. The first thing he sees when he turns on his computer is the stock price.

"Berkshire has been the biggest single influence on my life, by far," Scargle, 65 and retired, said as he was preparing to attend the company's 39th annual meeting here in the Qwest Center auditorium.

The Berkshire meeting, the biggest annual shareholders meeting in the country, and surely the most festive, is filled this year as most with early investors like Scargle. They are rich or richer because of their Berkshire investments, and they focus their gratitude on the founder, chairman and main engine of the company, Buffett, a lifelong Nebraskan who has cultivated a folksy, down-home style while making a personal fortune in the tens of billions.

To longtime investors, Buffett is the Dalai Lama, the pope, Will Rogers and Midas all in one.

"He has completely transformed my financial life," said Gifford Combs, a money manager from Los Angeles who bought his first Berkshire shares in 1980 at $340. "It's as if my life went from black- and-white to color. And he has done this for hundreds and hundreds of people."

On Friday, Buffett, 73, ambled through a thicket of blue blazers and silk dresses at a reception at Borsheim's Jewelry, chatting and posing for snapshots with investors. He opened the meeting on Saturday with an hourlong film of quips and sight gags.

"I'm a very happy guy," sang Jimmy Buffett, the entertainer, who invested in Berkshire 20 years ago and might be a very distant cousin to the Berkshire boss. "I bought Berkshire way back when it was cheap."

Warren Buffett quickly dispensed with the formalities of the typical annual meeting and, sitting at a folding table at one end of the auditorium, launched into a daylong seminar on his school of investing: Search out bargain stocks and companies and hold them forever.

*My retort is that if Tiger Woods is willing to spend six hours talking to you about your swing and you don't learn anything, well, it wouldn't be Tiger's fault,* Combs said. *I almost always come away with something new, and I'm almost always surprised at what it might be.*

Buffett has made a fortune for himself and his shareholders by investing heavily in a few stocks like Coca-Cola and Gillette, and, when he has not been able to find appealing stocks, buying entire companies. In the last four decades, Buffett has racked up an average annual growth for Berkshire of 22 percent, more than double the performance of the stock market as a whole.

Even so, he is not without detractors. In April, a big pension fund in California took Buffett to task for being a director of Coca- Cola and engaging in significant business dealings with Coke through various Berkshire units.

And in March, Thomas M. Kostigen, a columnist for CBS MarketWatch, declared that Buffett "may be the most overrated money manager in history."

The first assumption of Buffett loyalists is that critics are on the wrong track. "I wonder how many billions these guys have made in the stock market?" Scargle asked.

During the technology boom, Buffett stayed on the sidelines, saying he did not understand the racy stocks. Pegging him as a typewriter guy in a computer age, many investors jumped ship. But as Berkshire's share price drooped into the low $40,000 range, loyalists like Steve Wallman, 51, a money manager from Madison, Wis., doubled their bets. "I backed up the truck and loaded up on Berkshire at that price," said Wallman, who bought his first shares at $1,500 each in 1985.

Following his own buy-and-hold strategy to perfection, Buffett now owns 36.6 percent of Berkshire stock and has become the second- richest person in the world, after Bill Gates of Microsoft, with a fortune estimated at more than $45 billion.

"Everybody thinks the big trick in investing is to find the right stock," Wallman said. "But in many respects the trick is to hold onto it. You find yourself getting richer and richer and you say, 'What if this ends?' and you begin to diversify. And that's where people make their mistake. They tend to diversify away from their winners."

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Scargle, whose wife, Jane, died four years ago and who has no children, now flies to places like Hong Kong and Paris and plays golf twice a week, largely because of his Berkshire investment. As a clerk with a modest salary, he started by buying 10 shares at $175. But he gradually increased his holding to more than 200 shares, many of which came to him when Berkshire bought Blue Chip Stamps for stock, and Scargle converted his Blue Chip holdings into Berkshire shares.