Friday, May 25, 2012

Buffett Will Be 'Hands Off' With Newspapers

On Wednesday, Warren Buffett sent an e-mail to the publishers and editors of the newspapers Berkshire Hathaway (BRKa) owns.

What did it say?

From this Omaha World-Herald article:

Buffett: I'll be 'hands-off' with newspapers

"I believe newspapers that intensively cover their communities will have a good future. It's your job to make your paper indispensable to anyone who cares about what is going on in your city or town," Buffett said in his letter.

He also said:

"I have some strong political views, but Berkshire owns the paper I don't. And Berkshire will always be non-political..."

In addition to pledging to be "hands-off" he also made the following points:

- Berkshire does not use its resources to speak on behalf of its 600,000+ owners, and

- the purchase of more small and mid-sized newspapers is probable.

He also emphasized, and this will not be surprising to anyone who's read the Berkshire owner's manual or some other Buffett missives, something that he's talked about on prior occasions:

"Berkshire Buys for keeps."

From the owner's manual:

You should be fully aware of one attitude Charlie and I share that hurts our financial performance: Regardless of price, we have no interest at all in selling any good businesses that Berkshire owns. We are also very reluctant to sell sub-par businesses as long as we expect them to generate at least some cash and as long as we feel good about their managers and labor relations. We hope not to repeat the capital-allocation mistakes that led us into such sub- par businesses.

The manual later adds that to engage in "gin rummy managerial behavior" is not their style:*

True, we closed our textile business in the mid-1980's after 20 years of struggling with it, but only because we felt it was doomed to run never-ending operating losses. We have not, however, given thought to selling operations that would command very fancy prices nor have we dumped our laggards, though we focus hard on curing the problems that cause them to lag.

That's one of many things that makes selling a business to Berkshire a unique destination relative to other corporations.

It also should reinforce the point that Buffett's not buying these newspapers as a public service.

He expects them to be good investments for Berkshire and is likely in it for the long haul.


* Discarding the businesses that have the least promise at any given moment in favor of those with more promise.
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