What to Expect from Buffett's Annual Letter
byMar 1st 2013 7:45AM
Berkshire Hathaway Inc. (NYSE: BRK-B) is releasing its annual results and the widely read annual letter to shareholders on Friday afternoon. 24/7 Wall St. is looking at the tea leaves to see what Warren Buffett is likely to say in his annual effort. For starters, the prized Berkshire Hathaway Inc. (NYSE: BRK-A) A shares are outperforming the stock market in 2013 with gains of 13.8% in the first two months of the year alone. The price of $152,600 from Thursday's close also looks to be a new closing high.
With a lot of gains for holders and with shares at new highs, Buffett may be a bit more confident and less joking about mistakes than in the past. We also expect for the same sort of trends about who ultimately will succeed Buffett to run the Berkshire Hathaway empire upon his retirement, death or incapacitation. On the succession front, we expect that Buffett simply maintains that he and the company have a successor but will not disclose exactly who it is.
Buffett made some big changes to the total public stock holdings, but the involvement in the H.J. Heinz Co. (NYSE: HNZ) acquisition for more than $20 billion is something we expect to hear about. The real kicker is that Buffett already has said he would love to do another deal, but he does not like to telegraph industries nor companies because he does not want to drive up the price he would have to pay.
Another issue that may get notice is that Berkshire's MidAmerican Energy has done solar deals that involve First Solar Inc. (NASDAQ: FSLR) and SunPower Corp. (NASDAQ: SPWR). We would never expect Buffett to be a buyer of solar stocks. No way. But merely endorsing the solar sector's benefits (without making note of tax giveaways of course) may be enough to excite some investors after the sector's recent pullback on poor earnings.
Buffett also has continued his quest to gobble up newspapers and old media outfits, and it should not be a surprise if he addresses how he is buying up great old assets at a price that can mutate and transform with the changes to digital media ahead. The justification likely would be that these media presences are the most entrenched in the local market.
We also expect to hear praise of housing and that there are still great deals available for buyers. Buffett already has said he would just love to buy up a bunch of houses and either use them for rent or as future asset sales down the road, if they could be administered properly. Based on this idea, we already have seen an IPO filing from a competing interest to this from American Homes 4 Rent.
Two other possible companies worth noting are DaVita HealthCare Partners Inc. (NYSE: DVA) and Wells Fargo & Co. (NYSE: WFC). Team Buffett already bought up more DaVita shares. It was reported that the team has yet again added more shares to the stake in Wells Fargo.
We would not be surprised if Berkshire Hathaway's earnings are incredibly strong. After all, the stock's new high is a testament to something. We certainly expect that if that is the case, Buffett will remind investors not to get too excited about the company's earnings in any single quarter or year. Buffett has warned over and over that the company could take moves at any time that would make the earnings look better or worse, and his past reminders have been that the book value per share is the metric he wants to be judged on.
Lastly, it would be a total guess of what sort of analogies will come from the Oracle of Omaha. Do not be surprised if Warren Buffett says that he expects America's greatest days are still ahead, and we will leave the action of believing him up to you.
Filed under: 24/7 Wall St. Wire, Activist Investor, Annual Report, Buffett, Conglomerates, ETFs & Mutual Funds, Personal Finance, Private Equity Tagged: BRK-A, BRK-B, DVA, FSLR, HNZ, SPWR, WFC