Monday, October 10, 2011

Warren Buffett Reveals New Twist to his Optimal Investor Relations Strategy

During the Q&A portion of last week's Business Wire event, famed investor Warren Buffett discussed his investor relations strategy as CEO of publicly-traded Berkshire Hathaway (BRK-A). While much of his strategy is well known, he did recommend a novel approach that would complement traditional IR communications efforts. Here are some key quotes from the event:

...the most efficient way to communicate with hundreds of thousands of people which we have at Berkshire is through the written word. And I try once a year in an annual report to tell them (investors) what I would want to learn if our positions were reversed.
I have two sisters Doris and Bertie. They have significant percentages of their net worth in Berkshire (stock). They're smart but they're not spending all their time reading financial reports or the financial pages. I pretend that they've been away for a year, they've come back, and they've written me a letter saying "Warren, what's going on?". And then I write a letter saying "Dear Doris & Bertie...". And I tell them. And when I'm through I take off the "Dear Doris & Bertie" and then I mail it out to shareholders. In my view that's what should be done.

Those people (investors) are our partners. I want them to know.......what my partner Charlie Munger and I, who run the place think is important. I don't want to give them so much information that obfuscation sets in. I want to talk to them about what's important, what I'm thinking. I think every company should do that.
...I think that if you want to have some continuous dialogue for the year, most companies have investor calls and that sort of thing. I read those things like crazy, spend a long time reading them.
...But if I were to institute something beyond what we're doing I would probably say "send along questions". And every Saturday, Saturday morning, because I'd want the market to have the maximum time to digest any new information. If any of those questions were the kinds that I'd expect from my sisters, that would be important to shareholders, then I'd put the questions and my answers up on the Internet where everyone has a couple of days to digest the answers (before the market opens).

Any information that I've miscommunicated and I should have communicated earlier.....I would try to give the same answer to everybody at the same time.

The best way to do it, in my view, is to put it up (on the Internet) on a Saturday morning. We try to release all important information after the close on Friday because that gives people a maximum amount of time to read sometimes complicated information, our 10-Q for example, before the market opens on Monday....and if people want to blog about it or anything else. 
...They (investors) should all get the same information, they should get it at the same time, they should get it with the same degree of candor regardless of the number of shares that they own.
...We want to get owners who want to buy our stock and expect to own it for the rest of their lives.....We don't want shareholders who are buying because they think they're going to sell for more next month.
Buffett's vision for more frequent communication between public company executives and equity investors -- especially online -- is nothing new. We've seen glimpses of what's possible in this area over the last 5 years (click links for articles highlighting Motley Fool and Seeking Alpha).

The high volume of financial content available online has made courting investors a more challenging effort. As a result, Buffett's suggestion is ever more compelling and would no doubt draw investor interest.

Watch the entire clip here.

My latest blog posts at IR Web Report.

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