Berkshire Hathaway’s Annual Meeting Is Coming. Here’s What to Expect

Berkshire Hathaway CEO Warren Buffett may field shareholder questions about the company’s stock buyback program, investment activity, the acquisition environment, key subsidiaries, succession, and topics like Bitcoin and the SPAC mania at the company’s annual meeting on Saturday.

The meeting, normally in Omaha, will take place virtually from Los Angeles, enabling longtime vice chairman Charlie Munger, 97, to join the 90-year-old Buffett for 3½ hours of shareholder questions starting at 1:30 p.m. Eastern time.

Buffett is hoping to resume the Omaha extravaganza, which he calls a “Woodstock for Capitalists,” in 2022. The outspoken Munger, who didn’t participate in last year’s meeting, is popular with the Berkshire faithful. Buffett has run Berkshire for 56 years.

Berkshire shareholders will likely be in a good mood with the stock on a roll this year. The class A shares hit a record Monday and are up 0.9% to $412,365 on the session. The class B stock is up 0.7% to $273.96 Monday. The class A stock is up 18% this year, comfortably ahead of the S&P 500’s 12% total return, after badly lagging behind the index in both 2019 and 2020.

Berkshire’s aggressive stock repurchase program will probably be a major topic at the meeting. Investors are interested in Buffett’s current appetite for buybacks given the stock’s rally this year.

The company ramped up its buybacks in the second half of 2020, with about $9 billion repurchased in each of the final two quarters of 2020, up from a total of nearly $7 billion in the first half of the year.

Before the meeting on Saturday, Berkshire will release its first-quarter earnings, and investors will be focused on the buyback. The company’s operating profits are expected to be up 6%, to $2.55 a class B share, according to FactSet.

Barron’s has estimated that Berkshire bought back about $5 billion of stock from year-end through early March based on the share count disclosed in the recent proxy statement. Investors will look to see how much more stock Berkshire repurchased during the rest of March as the share price rose. Our guess is that Berkshire probably didn’t match the fourth-quarter total of $9 billion in the first quarter.

“I’m interested to see their enthusiasm for the buyback program given the performance of the stock,” says James Shanahan, an Edward Jones analyst, referring to Buffett and Munger.

Buffett has said Berkshire will be price conscious about buybacks, but has not provided any specifics.

Shanahan sees a rise in the book value to $296,000 a class A share on March 31 from $287,000 at year-end 2020. The stock now trades for about 1.4 times that March 31 estimate, up from a low of around 1.1 times book a year ago and close to the five-year average.

There could also be shareholder questions about climate change and diversity at Berkshire. The company has recommended that shareholders reject proposals about providing more disclosure about both issues.

Buffett is likely to weigh in on the current investment landscape.

He wasn’t aggressive on making new investments in 2020, as Berkshire sold a net $8 billion of stocks, including a group of airlines, and stakes in JPMorgan Chase (JPM) and Goldman Sachs Group (GS).

This disappointed many holders who hoped Buffett would have been a big buyer of stocks during the selloff and follow his maxim to be “fearful when others are greedy, and greedy when others are fearful.”

Source: https://www.barrons.com/articl...