Zhitong Financial APP learned that this Saturday is not only the day when Berkshire Hathaway (BRK.A.US) announced its first-quarter results, but also the day when the company held a shareholders' meeting. This is the only time a year that shareholders have the opportunity to ask Warren Buffett and his deputies about the company's vast business. At Berkshire Hathaway's shareholder meeting, which Buffett described as "the capitalist's Woodstock festival," shareholders will have four hours and 45 minutes to ask questions of Buffett, Greg Abel, who oversees the company's non-insurance business, and Ajit Jain, who oversees insurance.
What are the concerns of investors?
Berkshire Hathaway will report earnings at 8 a.m. ET on Saturday (8 p.m. ET on Saturday). In addition to the actual results, investors will be eager to know how much cash and short-term securities the investment giant has on its balance sheet. As of December 31, 2023, this figure is about $167.6 billion. Any decrease in this metric indicates that the company has been busy investing in other stocks or businesses. Berkshire Hathaway may also use some of the funds to buy back its own shares. In the fourth quarter of 2023, Berkshire Hathaway repurchased $2.2 billion of shares, bringing the total share buybacks for the full year 2023 to $9.2 billion.
Wall Street analysts believe Berkshire Hathaway will likely have higher cash reserves than it did at the end of last year when it reports its results on Saturday. Bill Smead, chief investment officer at Smead Capital Management, said: "There is so much money flowing in the market as the Fed injects money into the financial system, which makes valuations more difficult. "Warren Buffett will hold cash positions until people have a negative view of stocks. ”
James Shanahan, an analyst at Edward Jones, said Buffett has been a net seller of stocks for the past four quarters. In addition, analysts note that in the second half of last year, Buffett asked for secrecy about the shares he was acquiring, and he may reveal the mysterious stock at a shareholder meeting.
James Shanahan said that looking at the results themselves, it is worth watching how well the company's insurance underwriting business is doing. Insurance premiums have been rising faster than inflation in recent months, analysts noted, as insurers try to recoup what they paid for surging car and home repair costs. "Overall, I think the first quarter is going to be good," he said. But he also added that he didn't expect any big surprises.
Wall Street expects Berkshire Hathaway's insurance business and strong economy to help boost the company's profits, which could see a 10% year-over-year increase in operating profit in the first quarter. Bill Smead said: "Berkshire Hathaway is going to be strong. When the broader market is doing well, Berkshire Hathaway's operating business is doing very well. ”
Warren Buffett and his lieutenants may also discuss the following topics, including: Buffett's succession. Greg Abel was named Buffett's successor in 2021 and is expected to serve as CEO. In addition, shareholders are showing strong interest in how Berkshire Hathaway can navigate the challenges ahead, including how it can grow without paying exorbitant acquisition fees, whether the company will pay dividends, and how it can effectively use its large cash reserves. Shareholders may also be interested in Buffett's investments in Apple, Occidental Petroleum and five Japanese trading companies.
In addition, investors may also ask questions about climate risk and wildfire risk, as Berkshire Hathaway's Pacific Corporate Utilities faces liability claims for the 2020 Oregon fires, which could amount to billions of dollars. In a recent shareholder letter, Buffett warned that he no longer believes it is safe to invest in Western utilities given the risk of wildfire liability claims, and acknowledged that it was a "costly mistake" not to foresee the spike in these fees.
Other Berkshire Hathaway subsidiaries are also facing lawsuits that could also be questioned. It is reported that Berkshire Hathaway's real estate brokerage HomeServices of America recently reached a $250 million settlement in a lawsuit against industry-wide agency commissions. And just this week, the company was complained by a group of homebuyers who accused it of inflating the compensation it made to its agents.
It is worth mentioning that this is the first shareholder meeting of Berkshire Hathaway after the death of Munger, Buffett's long-time business partner, in November last year. Munger usually uses his straightforward and witty style to give his views on issues such as investment, philosophy, human weakness, corporate excesses, etc. James Shanahan said the shareholder meeting could be a little bleak after Munger's death, especially for those who hold shares in the company and have been going to Omaha for decades.
In a shareholder letter in February, Buffett acknowledged the constraints imposed by Berkshire Hathaway's size and said the company could not achieve spectacular results again. As the Buffett era comes to an end, his eldest son, Howard Buffett, is expected to become non-executive chairman to maintain the company's culture. At the same time, Todd Combs and Ted Weschler, who are responsible for some of the stock investments, may expand their responsibilities.
Ted Bridges, CEO of Bridges Trust, said that Buffett has shown that Berkshire Hathaway will not be able to replicate the glory of the past, but investors will be curious about the allocation and direction of capital in the next decade.
Economic barometer
Warren Buffett has long viewed his vast business empire as a barometer of the health of the U.S. economy. Investors will continue to pay attention to Warren Buffett's predictions for the state of the U.S. economy. Last year, Warren Buffett predicted that most of Berkshire Hathaway's businesses would see earnings declines as the U.S. economy nears the end of an "incredible period."
However, Berkshire Hathaway's operating profit in the fourth quarter of last year reached $8.48 billion, up from $6.63 billion a year earlier. Matthew Palazola and Eric Bedell, analysts at Bloomberg Intelligence, said: "While this [forecast] has largely not materialized, we expect similar news this year." Rising inflation and interest rates could weigh on Berkshire Hathaway's manufacturing, services and retail businesses, even though they have proven resilient, analysts said. During Saturday's meeting, the company's executives are likely to be asked about the impact of the Federal Reserve's efforts to bring inflation down on the company's consumer-oriented business.