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By Jason Stipp | 04-30-2011 04:12 PM

Our Breakdown on Berkshire

The annual 'Woodstock for Capitalists' featured a few tough questions, but still much love for the Oracle of Omaha.

Jason Stipp: I am Jason Stipp from Morningstar. The 2011 Berkshire Hathaway shareholders meeting just wrapped up. I am here with Paul Larson, equity strategist and Morningstar StockInvestor editor; and Gregg Warren, he is an equity analyst covering Berkshire Hathaway.

They are going to talk about some of the highlights, some of the disappointments, and some of the surprises from the meeting.

Thanks for joining me, guys.

Paul Larson: Thanks for having us.

Gregg Warren: Thanks for having us.

Stipp: First of all, Paul, any highlights, anything stand out for you from the meeting that is really going to be one of that top-of-mind take-home messages.

Larson: Well, one of the things that I thought was salient is they said over and over again that they did not want to issue shares of Berkshire Hathaway to go out and do acquisitions, and I think this is sort of relevant given in the last week we've had two major deals where companies actually went ahead and issued shares--Johnson & Johnson, which is a Berkshire investment, buying Synthes. And then also Exelon going out and buying Constellation Energy. I thought that there is interesting contrast, given those deals, with the advice that Buffett and Munger have been giving.

Stipp: Gregg, Berkshire actually did use some shares in the Burlington Northern acquisition. What was some of the reasoning there, and what's some of the reasoning for not really wanting to do this as a rule?

Warren: The Burlington Northern deal, I think, was a little bit special. It was one of the first deals in a very long time where they actually used shares to do a deal, and it was more based on the fact that splitting the stock and issuing it the way they did was sort of more benefit to the smaller shareholders that were in Burlington Northern.

And then the tangential thing that's never really talked about, which could have been a possibility as well, is that the increase in liquidity on the Class B shares opened them up to being included in the S&P 500, and if you remember back at that time, February 2010, we had just gone through this massive crisis with the financial-services sector, and S&P was looking for high-quality financial services firms because so many companies had blown up over the preceding two years.

And then why they wouldn't be looking to use it now, is again Warren continues to believe the stock is undervalued. They've got at this point close to $40 billion in cash on the books. Even the Lubrizol deal they are probably going to have somewhere in the nature of $45 billion at the end of the year. So they don't necessarily need to use stock. They would much rather use cash as a currency.

Stipp: Paul, there was a lot of talk before this meeting that it was going to be contentious. There were a lot of issues that were in the news recently that was not going to maybe make this the love fest that it had been in years past.

What was your sense of the overall tone of the meeting? Did that come to pass?

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