By Josh FunkOMAHA, Neb. -- Billionaire investor Warren Buffett said Saturday that he was "dead wrong" with a prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation's economy. In his annual letter to Berkshire Hathaway ( BRK.A) shareholders, Buffett said he is sure housing will recover eventually and help bring down the nation's unemployment rate. But he did not predict when that will happen.
A Class A share of Berkshire stock, which has never been split by the company, traded for $120,000 on Friday. Its more affordable Class B shares ( BRK.B) traded for about $80.Buffett reassured Berkshire shareholders that the company has someone in mind to replace him eventually, but did not name the successor. He emphasized that he has no plans to leave. Glenn Tongue, a managing partner at T2Partners investment firm, said he was struck by the fact that Buffett chose to deal with the succession topic as one of the first items in his letter. "I think this was a forceful and stronger attempt to put this issue to bed," Tongue said. Buffett offered a couple of details about Berkshire's succession planning in this year's letter. Investors have long worried about who will replace Buffett as Berkshire chairman and CEO. Buffett said the Berkshire board is enthusiastic about the executive it has picked and said there are two good back-up candidates. "When a transfer of responsibility is required, it will be seamless, and Berkshire's prospects will remain bright," Buffett said. Previously, Buffett had said only that the board had three internal candidates for the CEO job. Berkshire plans to split Buffett's jobs into three parts to replace him with a CEO, a chairman and several investment managers. Even though the successor wasn't named, stockbroker and author Andy Kilpatrick said the way Buffett described the person makes him more confident that the leading candidate is Ajit Jain, who runs Berkshire's reinsurance division. "The more I think about it, the more I think we have a successor," said Kilpatrick, who wrote Of Permanent Value: The Story of Warren Buffett. Besides Jain, the other Berkshire managers believed to be possible successors as CEO are Greg Abel, president and CEO of MidAmerican; Tony Nicely, chief executive of Geico; and Burlington Northern Santa Fe CEO Matt Rose.
Berkshire has also cleared up some succession questions over the past two years by hiring two hedge fund managers, Todd Combs and Ted Weschler. Buffett said those two have the "brains, judgment and character" to manage Berkshire's entire portfolio eventually.Buffett said Combs built a $1.75 billion portfolio last year and Weschler is in the process of doing the same. Buffett said he spent $67 million last fall buying back Berkshire stock for the first time since taking over the firm in 1965 because he believed it was undervalued. He said he regrets buying out shareholders at prices less than what the stock is worth. Buffett has authorization to buy back stock anytime it is selling for less than 110% of its book value.