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What Investors Are Watching For In This Year's Berkshire Hathaway Meeting

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What Investors Are Watching For In This Year's Berkshire Hathaway Meeting
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There are the usual yearly shareholder meetings held by corporations; then there’s Warren Buffett and the Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) annual shareholders’ meeting. Every spring, thousands trek to the eastern edge of Nebraska or listen online for plain-spoken investing wisdom from the Oracle of Omaha, and May 5 of this year will be no different.

Buffett currently has a net worth of nearly $85 billion, trailing only Amazon’s Jeff Bezos and Microsoft co-founder Bill Gates on the Bloomberg Billionaires Index of the world’s 500 richest people. Also, Buffett, chairman of Berkshire Hathaway, has helped to make Berkshire Hathaway investors a lot of money, in part thanks to a long-view, value-driven strategy with annual returns averaging about 20 percent since 1965.

There’s more to it than that, though – let’s call it the Warren Buffett effect.

The Berkshire Hathaway annual meeting is generally viewed as a “big deal,” because the company “has made it into an annual carnival as much as a shareholder meeting,” says Cathy Seifert, an analyst with CFRA (this year’s gathering includes a 5K race, a “shareholder shopping day” and a night at a local steakhouse). Buffett is “an enormous draw,” she adds. “He’s very open and forthright at these meetings, and people eagerly await what he has to say.”

Looking for the Berkshire Hathaway/Buffett basics?  A brief primer for investors:

There are “Two” Berkshire Hathaways

Berkshire Hathaway is a holding company with investments in a wide array of industries—airlines, banks, food and beverages, insurance, railroads and more—and it has two forms of stock. In terms of dollars alone, the Class A shares are among the most expensive anywhere, ending last week at nearly $296,000.

The more actively-traded Class B shares were around $197. Both versions move, more or less, in lock-step, Seifert says (each was down about 1 percent for the year, as of the end of April).

Buffett Has Still Been Upbeat on the U.S. Economy

In Berkshire Hathaway’s annual letter to shareholders for 2017, released in February 2018, Buffett said almost 90 percent of the company’s investments were in the United States. “America’s economic soil remains fertile,” Buffett said in the report.

What About Berkshire Hathaway’s Acquisition Strategy?

Two of the four “building blocks” that add value to Berkshire Hathaway, according to the letter, are “sizable, stand-alone” acquisitions and “bolt-on” acquisitions that fit with businesses it already owns (the other two are internal sales growth and investment gains from stocks and bonds).

Acquisitions have been Berkshire Hathaway’s modus for years. Still, the competitive landscape has intensified, so investors may want to listen for what Buffett may have to say about potential next moves, Seifert says.

Seifert notes that Berkshire Hathaway has nearly $100 billion in capital to deploy for acquisitions—as much “dry powder” as several large private equity firms also hunting for investments. There’s a “growing frustration” among some Berkshire Hathaway investors due to recent inability to consummate a deal, she adds. “Competition for attractive targets has increased, and Berkshire has refused to engage in hostile tactics.”

We Have a New U.S. Tax Law Now—What Might Buffett Say About That?

This is another fresh, potentially intriguing angle for this year’s Berkshire Hathaway shareholders meeting, Seifert says. In the 2017 annual report, Berkshire Hathaway noted that of the $65.3 billion gain in its net worth last year, only $36 billion stemmed from the company’s operations.

“The remaining $29 billion was delivered to us in December when Congress rewrote the U.S. Tax Code,” Buffett said in the letter. Buffett is known to speak his mind on taxes, among many other things.

Buffett’s Succession Plan?

Buffett turns 88 in August, so who will eventually take the reins at Berkshire Hathaway is a natural question, Seifert says, noting that earlier this year, the company named Ajit Jain and Greg Abel as directors (Jain is now responsible for insurance operations, Abel the rest of the businesses).

“How will Warren Buffett present himself?” adds Seifert. “Is he still spry and on-point?”

These are some of the topics on some investors’ minds ahead of what many call the “Woodstock for capitalists.”

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Information from TDA is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy, and is for illustrative purposes only. Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade.

Posted-In: JJ Kinahan TD Ameritrade The Ticker TapeNews Education Hedge Funds Markets General

 

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