As Warren Buffett hosts first Berkshire Hathaway annual meeting without Charlie Munger by his side, here's what to watch

By William Watts

Investors await Buffett's views on regulatory environment, potential acquisitions

When Warren Buffett presides over Berkshire Hathaway Inc.'s annual meeting on Saturday, attendees expect the event will carry an undercurrent of sadness following the death last November of Charlie Munger.

And there may also be an element of anxiety as investors contemplate the future of the conglomerate when Buffett, 93, leaves the scene.

"There is a very high-quality bench at Berkshire," but with a 93-year-old chairman and chief executive and an insurance chief, Ajit Jain, in his 70s, investors will be clamoring to hear from more members of the team, Cathy Siefert, an analyst at CFRA Research, said in a phone interview.

Berkshire's succession plan is fairly clear. The company in 2021 confirmed that Greg Abel, 61, who oversees Berkshire's noninsurance operations, will be Berkshire's post-Buffett CEO. Jain is expected to continue running the insurance businesses after Buffett leaves the scene, while Todd Combs and Ted Weschler are expected to head up investment operations.

See: Berkshire board member gives vote of confidence for Warren Buffett's eventual successor, Greg Abel

Several days of Berkshire-related festivities - dubbed "Woodstock for capitalists" by Buffett - precede and follow the annual meeting on Saturday. The main event kicks off at 10:15 a.m. Eastern time on Saturday, when Buffett will sit for nearly five hours of questions from shareholders and others. That's where the Buffett and Munger double act used to shine, with Buffett playing straight man to the colorful and acerbic Munger.

From the archives (November 2023): 9 of Charlie Munger's best investing lessons and words of wisdom

As in recent years, Abel and Jain will be on the dais alongside Buffett for the morning portion of the Q&A session, and Abel will join Buffett for the afternoon portion. But investors who had hoped to hear more directly from Combs and Weschler - together, they are responsible for around 10% of Berkshire's roughly $350 billion investment portfolio - may be disappointed.

Indeed, Munger's death at 99 in November brought calls from some shareholders for more visibility for the pair.

More from the archives (November 2023): What's next for Warren Buffett and Berkshire Hathaway after Charlie Munger's death

Nevertheless, Berkshire shareholders should be in a buoyant mood. Class A shares (BRK.A) were up 11.6% in the year to date through Thursday's close, while class B shares (BRK.B) were up 12.2% versus the S&P 500's SPX 6.1% advance.

The political backdrop and the regulatory environment will likely be on investors' minds, John W. Rogers Jr., chairman and founder of Ariel Investments, told MarketWatch.

While Buffett regularly warns investors not to bet against the U.S., it will be interesting to hear if Buffett has any specific concerns around this year's election, Rogers said. Fellow value investors also have concerns about an antitrust environment that may make it more of a challenge for companies to complete strategic transactions, which are often how value gets realized, he said.

Meanwhile, Berkshire has found itself embroiled in some high-profile litigation, which may also prompt questions, Seifert said. A Berkshire-owned utility faces $30 billion in new claims related to Oregon wildfires; Berkshire earlier this year settled a valuation lawsuit surrounding its acquisition of Pilot travel centers; and Berkshire's Home Services of America agreed to pay $250 million to settle litigation over broker commissions.

Buffett, in his annual letter to shareholders in February, raised concerns about utilities, at least in states prone to wildfires.

"Berkshire can sustain financial surprises but we will not knowingly throw good money after bad," Buffett wrote.

Investors will be eager to hear whether increased litigation risks have soured Berkshire's interest in other areas, Seifert said.

On the upside, Buffett may have room to take another victory lap over Berkshire's investments in Japanese trading houses.

Shares in Japan's trading houses have subsequently surged since Buffett announced a year ago that he would be upping his stakes in the huge conglomerates that sell everything from cars to renewable energy. Bloomberg reported this week that hedge fund Elliott Management was following on Buffett's coattails, building a large stake in Sumitomo Corporation, which counts Berkshire Hathaway as its top shareholder.

Meanwhile, Berkshire is likely sitting on a cash pile of around $170 billion, Seifert estimated, leaving investors hungry for hints or indications as to how it might be deployed.

It's a topic that's likely to come up during the Q&A, though Buffett, as he has in the past, warned in his February letter that given the company's size there "remain only a handful of companies in this country capable of truly moving the needle at Berkshire, and they have been endlessly picked over by us and by others."

Investors also come to Omaha to hear Buffett opine on the art of investing. In some ways, the annual gathering is something of a "value managers convention," said Ariel's Rogers.

Buffett reminds people to think long-term as investors; to remain within their "circle of competence"; and to buy companies surrounded by "moats," or strong competitive advantages that can't easily be eroded, Rogers said. Doing those three things will allow investors to "get it right more often than not," especially if they have the discipline to buy those companies when they're trading at a discount, Rogers said.

Meanwhile, Munger will be missed.

"It will be said ... we will miss [Munger's] honest appraisal of things that are not right with the world and not right with the investment community," Rogers said. "It always made you think."

-William Watts

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05-04-24 0646ET

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