Warren Buffett admits mistake over shares

The investment guru told some 40,000 shareholders gathered at the annual meeting of his conglomerate Berkshire Hathaway he should have questioned David Sokol more thoroughly over why he held shares in a firm Berkshire was looking at acquiring.

Buffett said the company had been battered by the Sokol scandal and a string of natural disasters.

But he assured shareholders Berkshire was strong enough to withstand the hit, despite an estimated $1.7 billion (1bn) in insurance losses, which are expected to have driven profits down 58 per cent in the first quarter.

Buffett said he would never understand why Sokol bought stock in Lubrizol shortly before recommending that Berkshire buy the chemical company in a $9bn deal, which he added violated Berkshire's insider-trading rules. Sokol has denied any wrongdoing.

Buffett, talking ahead of first-quarter results due from Berkshire on Friday, said the biggest factor in the earnings drop was down to losses related to the Japanese earthquake and tsunami, Australian floods and the New Zealand earthquake.

He estimated Berkshire would report $1.5bn in net income, down from $3.6bn last year.

Buffett said all of Berkshire's policies on ethics and insider trading would be reviewed following Sokol's alleged share trading. He spent nearly six hours answering questions at the annual meeting.

Sokol resigned from Berkshire in March. Before his departure, he had served as chairman of Berkshire's MidAmerican Energy, NetJets and Johns Manville divisions and was once considered Buffett's potential heir.