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TheStreet Open House

Berkshire Shares Hit New Record As Buffett's Omaha Meeting Looms

In a twist to the shareholder meeting, Doug Kass -- head of Seabreeze Partners and a contributor at TheStreet -- will present a case for shorting shares of Berkshire Hathaway.

While Kass will certainly have room to make an argument, and he could even borrow Buffett's words, shorting Berkshire Hathaway shares has made for a disastrous trade over multiple decades.

Kass, who said he is shorting Berkshire's Class B shares and is slightly underwater since initiating the position about a month ago, has bet against the 'Oracle of Omaha' before.

In March 2008, Kass wrote an article for TheStreet outlining 11 reasons to short Berkshire shares. Subsequently, Berkshire shares fell about 40% amid a collapse in the U.S. financial sector.

On Saturday, Kass told TheStreet his participation as a Berkshire bear will add a twist to the conglomerate's annual meeting.

" Warren Buffett was probably feeling the questions were getting a bit redundant... I think he wants to be challenged," Kass told TheStreet.

"I have one big challenge for him, which I think will reverberate the auditorium," Kass said.

Kass's participation at Berkshire's shareholder meeting may also underscore investor concerns about the direction of the company such as management transition and a deployment of the company's cash stockpile.

"I think the succession question will be obviously front and center," said Russo, the Garner, Russo & Gardner partner. "I gather there will be some commentary."

Buffett has already made it clear his two portfolio managers Todd Combs and Ted Weschler are likely to takeover reins of Berkshire's investment portfolio.

"Todd and Ted are young and will be around to manage Berkshire's massive portfolio long after Charlie and I have left the scene," Buffett wrote. "In 2012 each outperformed the S&P 500 by double-digit margins. They left me in the dust as well.

In late 2011, Buffett also said his son, Howard Buffett, will succeed him as a non-executive chairman of Berkshire to oversee a maintenance of the firm's values.

Less clear is who would be chief executive of Berkshire Hathaway. Currently, speculation centers on insurance unit head Ajit Jain, BNSF railroad CEO Matthew Rose, MidAmerican Energy CEO Greg Abel as leading candidates to be Buffett's successor.

Buffett has informed Berkshire Hathaway's board of directors of his successor.

Russo, the Berkshire investor, sees room for multiple job openings to replace Buffett, when the time comes. For instance, someone like Weschler or Combs could find a new role at Berkshire advising the company's various operating subsidiaries. A separate role could be made for acquisitions, decisions traditionally handled by Buffett.

Russo expects up to four roles to replace Buffett.

"My assumption is that it is Ajit Jain," Meyer Shields, a Keefe, Bruyette Woods analyst covering Berkshire's shares, says of CEO transition. "You've got capable mangers in Berkshire's operating units. In Ajit's case, the primary skill he has is saying no. It sounds trite but that is the trickiest part of the job because you can make so many mistakes."

Shields also forecasts Berkshire's insurance unit may become more aggressive in writing premiums in coming years. His expectations are highlighted by Berkshire's recent hiring of four top executives from insurance giant AIG (AIG).

In a Friday interview with Bloomberg Television, Warren Buffett said the four AIG executives had approached Berkshire and will help the company grow its commercial insurance business.

"We would like to get into the commercial-insurance business very big time," Buffett said.

With units such as Geico and General Re, Berkshire has large operations consumer insurance and reinsurance, however, it has less of a market position in providing insurance to businesses.

William Smead, the Berkshire investor and CIO of Smead Capital highlighted insurer Aflac (AFL) as one elephant-sized acquisition for Buffett, were the Amos family ever to decide on selling the company. Smead sees a deal as unlikely but notes, "It's just a matter of Aflac coming to Berkshire with a price."

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