Berkshire Hathaway Chief Executive Officer Warren Buffett made his name by being greedy when others were fearful and fearful when others were greedy, dispensing folksy wisdom along the way.
Investors certainly have plenty to be fearful of as they contend with elevated market volatility, turmoil in the regional banking sector and a hawkish Federal Reserve that’s taken aggressive steps to contain inflation. So perhaps a bit of folksy wisdom from Buffett during the annual meeting Saturday will go a long way.
“The markets are at such an odd inflection point and there’s so much volatility, I think there’s going to be a lot of interest in hearing what he has to say,” CFRA analyst Cathy Seifert said in a phone interview. “Particularly since we’re heading into this meeting with the debt ceiling deadline looming.”
This annual meeting is only the second one to be held in person since 2019. Last year’s event came hot on the heels of Berkshire’s deal for insurer Alleghany Corp. and a buying spree that built out stakes in Occidental Petroleum Corp. and HP Inc.
Since then, Berkshire has been less active. There haven’t been major announcements in line with the Alleghany deal, though Buffett made news in April when he joined CNBC for a three-hour block of programing from Japan, joined for the first hour by heir apparent Greg Abel.
Berkshire’s legendary stock picking has also been more muted, with the conglomerate demonstrating a greater interest in paring back certain investments instead of piling into new ones. Berkshire turned heads when it took a stake in Taiwan Semiconductor Manufacturing Co. only to slash the position by 86% the next quarter, with Buffett chalking up the decision to concerns over geopolitical tensions even as he praised the chipmaker.
Berkshire’s appetite isn’t the only thing that’s moderated. Markets have been volatile this year, with banking-sector turmoil and recession fears competing with building optimism that the Fed has reached the end of its rate-hiking cycle.
Here’s what else to watch during the annual meeting this year:
Succession
Shareholders will have a chance to press Buffett for details on what the conglomerate will look like once he’s gone. Questions around succession planning take on new urgency with each passing year. Buffett is 92, while while his longtime investing parter and Vice Chairman Charlie Munger turned 99 in January.
Abel, who’s also a vice chairman, became Buffett’s clear successor in 2021. He’s built Berkshire’s energy business into one of the largest in the US. Buffett joked during his appearance on CNBC that Abel does “all the work,” and investors will likely take the annual meeting as an opportunity to assess that comment.
“Even at last year’s meeting, Greg Abel had a much more prominent role,” said Seifert, the CFRA analyst. “People are going to be looking for signs that Greg Abel is doing more of the heavy lifting.”
There’s also a question as to how much, if any, screen time will go to the executives who run the various businesses under Berkshire’s umbrella. Buffett and Abel spotlighted two of those executives — BNSF CEO Katie Farmer and incoming Pilot Flying J CEO Adam Wright — during their interview with CNBC.
“When I think of the talent there, it’s just amazing,” Abel said. “And their leadership skills are remarkable.”
Banking
Another topic Buffett might address is banks. Buffett was long a major buyer of financial stocks, becoming the largest shareholder of companies including U.S. Bancorp. But he’s been shrinking his exposure to the sector, exiting a position in Wells Fargo & Co. and trimming his U.S. Bancorp stake. Berkshire remains the biggest shareholder of Bank of America Corp.
Recent turmoil in which four regional US banks have collapsed since March presents an apparent opportunity for Buffett to step in and put cash to work. After Buffett held talks with Biden administration officials regarding the turmoil, no announcements were forthcoming about related investments.
“I actually wasn’t expecting him to do much,” Edward Jones analyst Jim Shanahan said in a phone interview. Berkshire’s existing exposure to the sector and recent efforts to trim it probably played a role, he said.
Buffett said during his CNBC appearance that we hadn’t seen the last of bank failures, and that his enthusiasm for the sector was cooling.
Inflation, earnings
Berkshire and its diverse subsidiaries function as a proxy for the state of the US economy, and Buffett has repeatedly linked the firm’s growth and his own financial success to the nation’s performance.
That means Berkshire’s results have been sensitive to the inflationary pressures acting on the economy. The cost of goods for some businesses has soared and profitability of others has eroded, including Geico’s auto-insurance operations.
The annual meeting this year comes a day after the latest job numbers, and Biden’s commentary on the outlook for the US economy and inflation. The Fed hinted on Wednesday that it could pause rate hikes.
Investors will get a look at the latest details of Berkshire’s finances Saturday morning, when it reports results ahead of the annual meeting.
“I expect some good earnings results for the first quarter,” said Shanahan of Edward Jones. “Modest” slowdowns in revenue for certain business lines will be more than offset by significant gains to net interest income on cash holdings, he said.
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