Warren Buffett said Saturday he might hire up to four people to succeed him as chief investment officer of Berkshire Hathaway and cautioned that recent strong results from the company's insurance operations were unsustainable.
The 76-year-old billionaire said he has received 600 to 700 inquiries for the CIO job since lamenting in his Feb. 28 annual shareholder letter that Berkshire has no internal candidates young enough to serve a long time.
Buffett has said Berkshire has three candidates to succeed him as chief executive.
"I don't think it's at all impossible to think we'll find three or four" CIOs, Buffett said at Berkshire's annual shareholder meeting. "We will come up with, probably, a couple of people."
Attendance usually approaches 24,000 for the meeting, including many watching by video outside the main arena.
The meeting was held one day after Berkshire reported a 12% jump in first-quarter profit to $2.6 billion, helped by strong performance in insurance, which usually accounts for more than half of earnings. Insurance operations have benefited from a lack of major storms after 2005.
"Insurance earnings are going to go down, there's no question," a somewhat hoarse Buffett said. "As natural catastrophes occur, we will be paying out lots of money."
Buffett also said Berkshire's residential construction businesses may be pressured amid the U.S. housing downturn, though problems in U.S. subprime lending will not likely drag down the overall economy.
A shareholder proposal to require divestment of Berkshire's stake in PetroChina because of the alleged ties of the Chinese oil company's parent to Sudan suffered an overwhelming defeat.
Next Steps
Berkshire ended March with $46.03 billion of cash, leaving it with much firepower to make the large purchases that Buffett covets. Many may be international.
Buffett said he would like to buy a "huge" business for Berkshire and would sell other investments to buy it. "I would hope that something would come along that would force us to sell something that I like to buy (something) huge," Buffett said at a press conference. "We have plenty of things to sell if we needed to, but the cash is coming in faster than the ideas."
Charlie Munger, Buffett's second-in-command, added: "If it happens, I think we'll recognize it." Berkshire has long said it would like to make a $5 billion to $20 billion acquisition. The company
ended March with $46.03 billion of cash, and nearly $90 billion of cash and fixed-income securities on its balance sheet.
"The entire world is definitely on our radar screen, and we hope to be on its," Buffett said.
Buffett said the recent "frenzied activity" in private equity takeovers is unlikely to end soon, especially given the "compulsion" to raise more cash and generate higher fees.
“It will be quite some time before ... disillusionment sets in and the money quits flowing," he said. "What could slow down the activity is if yields on junk bonds became much higher than yields on high-grade bonds."
On executive compensation, Buffett said he was untroubled by many large pay packages for top corporate executives, though not when they are awarded simply to keep up with rivals.
Buffett, whose net worth Forbes magazine estimated in March at $52 billion, takes a $100,000 salary to run Berkshire.
"Compensation sins are generally of minor importance compared to the sin of having someone mediocre running a huge company," Buffett said.
He also said he did not foresee a "credit contraction" and that corporate America appears unusually healthy now.