Buffett's Most Intriguing Quotes Explained
NEW YORK ( TheStreet) -- In his annual letter to Berkshire Hathaway's (BRK.A) shareholders, Warren Buffett revealed that the company has lined up his successor as CEO, even if retirement is still a long way off.
Buffett also outlined why he thinks Berkshire can profit from its recent IBM(IBM) investment even if the tech giant's shares don't appreciate in the next five years .
Here's a look at the most memorable quotes of the letter.
"Your Board is equally enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire. (We have two superb back-up candidates as well.)"
Buffett indicated that Berkshire's board has found a successor CEO, without naming who it is. In the meantime, he continued to praise newly hired investment managers Todd Combs and Ted Weschler, who will both manage billion-dollar-plus sized portfolios in 2012. But don't expect Buffett, 81, or his investing partner Charlie Munger, 88, to quit Berkshire anytime soon.
"Do not, however, infer from this discussion that Charlie and I are going anywhere; we continue to be in excellent health, and we love what we do."
"We made few changes in our investment holdings during 2011. But three moves were important: our purchases of IBM and Bank of America and the $1 billion addition we made to our Wells Fargo position."
"Brian Moynihan has made excellent progress in cleaning these up, though the completion of that process will take a number of years. Concurrently, he is nurturing a huge and attractive underlying business that will endure long after today's problems are forgotten."
Berkshire moved markets in the summer of 2011 when he took a $5 billion preferred share stake in Bank of America (BAC) and bought up 700 million warrants to buy the company's stock, which are currently in the money.
"We should wish for IBM's stock price to languish throughout the five years," said Buffett of his $10.3 billion buy of "Big Blue's" stock, which puts his stake at 5.51%. Here's the math for why.
IBM has roughly 1.16 billion shares, 63.9 million of which are owned by Buffett in a 5.5% shareholding. Buffett expects the value of his investment to rise significantly as the company conducts its five-year, $50 billion stock repurchase program.
If IBM shares languish at their current near-record price of a little less than $200, IBM will buy back 250 million shares, putting Buffett's stock ownership closer to 7%, as the company's share count shrinks to 910 million shares. But if IBM shares continue to rise to say $300 a share, Buffet's stake would only be 6.5% on a share buyback of just 167 million shares.