The Zhitong Finance App learned that this Saturday was not only the day Berkshire Hathaway (BRK.A.US) announced its first quarter results, but also the day the company held a shareholders' meeting. This is the only opportunity each year for shareholders to ask “stock god” Buffett and his deputy questions about the company's huge business. At the Berkshire Hathaway shareholders' meeting, described by Buffett as “The Capitalist's Woodstock Music Festival,” shareholders will have 4 hours and 45 minutes to ask questions to Buffett, Greg Abel, who is responsible for the company's non-insurance business, and Ajit Jain, who is responsible for the insurance business.

What are investors' concerns?

Berkshire Hathaway will announce financial results at 8 a.m. EST on Saturday (that is, 8 p.m. Beijing time on Saturday). In addition to actual results, investors will also be anxious to know how much cash and short-term securities the investment giant still has on its balance sheet. As of December 31, 2023, this figure was approximately US$167.6 billion. Any decrease in this indicator indicates that the company has been busy investing in other stocks or businesses. Berkshire Hathaway is also likely to 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 repurchases for the full year of 2023 to $9.2 billion.

Wall Street analysts believe that when Berkshire Hathaway reports results on Saturday, the company's cash reserves may be higher than at the end of last year. Bill Smead, chief investment officer of Smead Capital Management, said: “As the Federal Reserve injects capital into the financial system, there is too much capital flowing in the market, which makes valuation more difficult.” “Buffett will hold a cash position until people have a negative view of the stock.”

Edward Jones analyst James Shanahan said that Buffett has been a net seller of stocks for the past four quarters. Furthermore, analysts pointed out that in the second half of last year, Buffett requested that the stock he was buying be treated confidentially, and he may reveal this mysterious stock at the shareholders' meeting.

James Shanahan said that judging from the performance itself, we can pay attention to how the company's insurance underwriting business is doing. Analysts pointed out that insurance premiums have been rising faster than the inflation rate in recent months as insurers try to recover the costs of soaring car and home maintenance costs. “Overall, I think the first quarter will perform well,” he said. But he also added that he doesn't expect any big surprises.

Wall Street anticipates that Berkshire Hathaway's insurance business and strong economy will help boost the company's profits, and the company's operating profit for the first quarter is likely to increase 10% year over year. Bill Smead said, “Berkshire Hathaway's performance will be strong. When the market performs well, Berkshire Hathaway's operations perform very well.”

Buffett and his deputies 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. Additionally, shareholders have shown strong interest in how Berkshire Hathaway can meet future challenges, including how to achieve growth without paying excessive acquisition costs, whether the company will pay dividends, and how to effectively use its huge cash reserves. Shareholders may also be concerned about Buffett's investments in Apple, Occidental Petroleum, and five Japanese trading companies.

Additionally, investors may also ask questions about climate risk and wildfire risk, as Berkshire Hathaway's Pacific Utilities Company faces liability claims for the 2020 Oregon fires, and compensation amounts could reach billions of dollars. In a recent shareholder letter, Buffett warned that he no longer considered it safe to invest in Western utilities given the risk of wildfire liability claims, and acknowledged that not anticipating these surges in fees was a “costly mistake.”

Other Berkshire Hathaway subsidiaries are also facing lawsuits that may raise questions. According to reports, HomeServices of America, a real estate brokerage company owned by Berkshire Hathaway, recently reached a settlement agreement of 250 million US dollars in a lawsuit against agency commissions across the industry. And just this week, the company received another complaint from a group of buyers accusing the company of exaggerating compensation to agents.

It is worth mentioning that this is Berkshire Hathaway's first shareholders' meeting since the death of Buffett's long-time business partner Munger in November last year. Munger usually expresses his views on issues such as investment, philosophy, human weakness, and excessive corporate behavior in his straightforward and witty style. James Shanahan said that after Munger's death, this shareholders' meeting may be a bit bleak, especially for those who own the company's shares and have been going to Omaha for decades.

In a February shareholder letter, Buffett acknowledged the restrictions imposed by the size of Berkshire Hathaway and stated that the company could no longer achieve amazing results. As the Buffett era comes to an end, his oldest son Howard Buffett is expected to become a non-executive chairman to maintain the company's culture. Meanwhile, Todd Combs and Ted Wechler, who are responsible for some of the stock investments, may expand their responsibilities.

Bridges Trust CEO Ted Bridges said that Buffett has shown that it is difficult for Berkshire Hathaway to replicate its past glory, but investors will be curious about capital allocation and development direction in the next ten years.

Economic barometer

Buffett has long viewed his vast commercial empire as a barometer of America's economic health. Investors will continue to pay attention to Buffett's predictions about the state of the US economy. Last year, Buffett predicted that most Berkshire Hathaway businesses would experience a decline in profits as the “incredible period” of the US economy came to an end.

However, Berkshire Hathaway's operating profit for the fourth quarter of last year reached 8.48 billion US dollars, up from 6.63 billion US dollars in the same period last year. Bloomberg Intelligence analysts Matthew Palazola and Eric Bedell said, “Although this (forecast) has largely not been realized, we expect similar news this year.” Analysts said rising inflation and interest rates could put pressure on Berkshire Hathaway's manufacturing, service and retail businesses, although these businesses have proven to be resilient. At Saturday's meeting, company executives may be asked about the impact of the Federal Reserve's efforts to reduce inflation on the company's consumer-oriented business.