By one measure, Warren Buffett is coming off his worst year ever. But by another measure, the investor may be more popular than ever.

Berkshire Hathaway Inc , Buffett's insurance and investment company, expects a record 35,000 people to attend its annual meeting on Saturday.

That's up from 32,000 last year, a crowd that was already bursting the seams of the Qwest Center in downtown Omaha in what has become known as Woodstock for Capitalists.

The main event features five hours of questions and answers with Buffett, 78, and his longtime, rather less-inhibited number two, Vice Chairman Charlie Munger, 85.

They should go down in history for accomplishing what they did with honest principles, said Ernie Petrocine, 58, an owner of two retail clothing stores in Estes Park, Colorado, attending his 16th meeting. Buffett has a common sense approach to the world. It might be a real simple thing you've heard 1,000 times, but when he says it, it's profound.

Buffett, the world's second-richest person, is coming off a tough year for Berkshire, when its book value per share fell 9.6 percent in 2008, the biggest drop in Buffett's 44 years at the helm. And Berkshire's Class A shares closed on Wednesday at $93,400, down nearly 40 percent from their peak of $151,650 in December 2007.

I expect a more serious tone this year, said Bill Bergman, an equity analyst at Morningstar Inc in Chicago, who is attending the meeting. Berkshire investors aren't used to a 40 percent decline in the market value of their shares.

Berkshire issued about 100,000 shareholder credentials for this year's annual meeting, spokeswoman Carrie Kizer said. Typically, about 35 percent are used.

In a departure from previous years, Berkshire will not release its first-quarter earnings report on the eve of the May 2 meeting, the company said on Wednesday.

The company said it was never scheduled to release its earnings report this week, and will announce them May 8.

DERIVATIVE BETS

Some of the decline in Berkshire's stock stems from big drops in the value of equity investments such as American Express Co and Wells Fargo & Co .

I do think and hope he spends more time talking about his holdings in financial stocks, said Andy Kern, a doctoral candidate at the University of Missouri who writes the blog Berkshire Ruminations. Those are the stocks in the Berkshire portfolio that more people worry could drag down performance.

But much of the decline is tied to Berkshire's derivative contracts, many of which are long-term bets that stock market indexes will rise and junk bond defaults will not go sky-high.

If those markets are at their December 2008 levels when the derivatives expire in the future, Berkshire would have to pay out $13 billion.

But Buffett says the contracts differ from the financial weapons of mass destruction he has called other derivatives, in part because of the billions of dollars of upfront premiums he can invest.

Berkshire sells such items as bricks, candy, car insurance, carpets, ice cream, jewelry, knives, paint and underwear. About half its business comes from insurance and reinsurance. Many businesses have been hurt by the recession.

Buffett is worth $40 billion, trailing only Microsoft Corp co-founder and Berkshire director Bill Gates, Forbes magazine said in March. Most of Buffett's wealth is in Berkshire stock, and will eventually go to charities, including the Bill & Melinda Gates Foundation.

The weekend events start with a food-and-cocktail fest at Berkshire-owned jeweler Borsheim's.

Thrifty shoppers looking to save their pennies can buy such things as a Berkshire Hathaway Piggy Bank (cost: 2,804 pennies) or a pair of 18-karat white gold earrings with diamonds (cost: 1,600,000 pennies, according to Borsheim's catalog -- minus the shareholder discount).

COMPLEX CRISIS

At the meeting itself, Buffett and Munger are expected to expound freely about business, the economy and life.

This year, they should have a field day.

Buffett hasn't really discussed how to get us out of this mess, Kern said. I would leave it to Buffett to make sense of it for everyone else.

Half of this year's questions will be posed by journalists, drawn from e-mailed submissions, rather than shareholders. That change came after protesters last year consumed a good chunk of the question-and-answer period.

Buffett and Munger won't know the questions in advance. We know the journalists will pick some tough ones and that's the way we like it, Buffett wrote in his shareholder letter.

Succession will remain an issue, given Buffett's age. Buffett has said Berkshire has three internal candidates to replace him as chief executive officer, and four young to middle-aged candidates to become chief investment officer.

I tell my children, as long as Warren stays alive, don't sell, said Child, who said 90 percent of his net worth remains in Berkshire shares. But this is one of the most important decisions he'll make, and he'll make it right.

(Reporting by Jonathan Stempel; Additional reporting by Lilla Zuill; editing by Carol Bishopric)

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