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Munger Says Buffett Owes No Apology for Missing Target

Charles Munger
Berkshire Hathaway Vice Chairman Charles Munger arrives for the company's annual shareholders meeeting in Omaha, Nebraska, on Saturday, May 3, 2014. Photographer: Daniel Acker/Bloomberg

May 3 (Bloomberg) -- Warren Buffett doesn’t owe shareholders an apology for falling short of a performance goal at his Berkshire Hathaway Inc., Vice Chairman Charles Munger said at the company’s annual meeting.

Munger said Buffett set a high bar with a target of boosting Berkshire’s net worth more than the advance of the Standard & Poor’s 500 Index over a five-year period. Berkshire fell short in the stretch that ended Dec. 31, and Buffett said in a March report to shareholders that performance should instead be measured over the course of stock-market cycles.

“Warren has set a ridiculously tough standard,” Munger said today in Omaha, Nebraska. “If this is failure, I want more of it.”

Book value, the measure of assets minus liabilities that Buffett highlights, rose to $134,973 a share at the end of December, 91 percent more than where it stood five years earlier. The S&P 500 returned about 128 percent during that period, including dividends, as stocks rallied from their financial-crisis lows. The Berkshire number is an after-tax figure, whereas the index results are before taxes.

Book value at Berkshire rose 2.6 percent in the first quarter to $138,426 a share. The S&P 500 posted a total return of 1.8 percent in the period.

While Buffett said today that he didn’t change the yardstick by which he measures Berkshire’s performance, the shift away from a five-year target raises questions about transparency, Meyer Shields, an analyst at Keefe, Bruyette & Woods Inc., said in a note to clients dated May 1.

“In the years leading up to 2013, Mr. Buffett’s letter focused only on five-year relative performance,” Shields wrote. “The words ‘stock market cycle’ didn’t appear even once.”

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editors responsible for this story: Dan Kraut at dkraut2@bloomberg.net Dan Reichl, Nancy Moran

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