Buffett's Meet Eyes Future, Munger Missed, 10% Earnings Jump

Key Takeaway

• Berkshire Hathaway's first meeting without Charlie Munger focuses on future leadership, with Greg Abel spotlighted as Buffett's successor.
• Analysts predict a 10% jump in Berkshire's Q1 earnings, driven by insurance businesses and a robust economy.
• The meeting will address challenges including climate risks and portfolio management, with an eye on successors' strategies.

Berkshire Without Munger

The annual Berkshire Hathaway shareholders' meeting in Omaha, Nebraska, marks a poignant moment this year as it convenes for the first time without Charlie Munger, Warren Buffett's long-standing partner, who passed away in November just shy of his 100th birthday. Munger, known for his blunt and witty commentary, played a crucial role alongside Buffett in transforming Berkshire from a failing textile mill into a $862 billion conglomerate. His absence is felt deeply among attendees, with investor Bill Smead remarking, “He was the sriracha sauce in the Berkshire Hathaway meeting. He gave it a lot of flavor.” Analysts and long-time attendees anticipate a somber tone to the start of the meeting, reflecting on Munger's significant contributions and the dynamic he shared with Buffett.

Leadership and Future Direction

With Munger's absence, attention turns to Berkshire's future leadership and the role of Greg Abel and Ajit Jain, who oversee the conglomerate's non-insurance and insurance operations, respectively. Abel is designated as Buffett's successor as CEO, a decision that has been met with confidence from Buffett and anticipation from shareholders. The meeting presents an opportunity for shareholders to gain insights into Abel and Jain's management philosophies and how they might steer Berkshire in the coming years. Morningstar analyst Greggory Warren expressed hope that Abel would use this year's meeting to showcase his capabilities, highlighting the deep bench of management talent within Berkshire.

Financial Performance and Expectations

Berkshire Hathaway's first-quarter earnings report is eagerly awaited, with analysts predicting a boost in profit driven by its insurance businesses and a robust economy. The conglomerate's vast portfolio, including significant stakes in Apple, American Express, and Coca-Cola, alongside its array of manufacturing and retail businesses, positions it as a barometer for U.S. economic health. Analysts expect a 10% jump in operating income from the previous year, attributing potential gains to better underwriting results and higher yields, particularly from Geico. The insurer's performance, described as a "work in progress" by Jain, will likely be a focal point for questions, especially regarding its market share and future outlook.

Challenges and Opportunities

The meeting is also set to address various challenges and opportunities facing Berkshire, from climate risks and wildfire exposure to economic forecasts and the conglomerate's cash surplus. Buffett's recent shareholder letter acknowledged a "costly mistake" in underestimating wildfire liability claims, highlighting the complexities of investing in utilities. Additionally, the performance of Berkshire's successors in managing its stock portfolio, Ted Weschler and Todd Combs, will be under scrutiny. Despite trailing the S&P 500 with a 7.8% return, their diverse investment strategies reflect the evolving market dynamics and the challenges of managing a vast portfolio in a rapidly changing environment.

Street Views

• Bill Smead (Neutral on Berkshire Hathaway):

  "He was the sriracha sauce in the Berkshire Hathaway meeting. He gave it a lot of flavor."

• Whitney Tilson, Stansberry Research (Neutral on Berkshire Hathaway):

  "Warren always did at least 80% of the talking. But Charlie was a great foil."

• Greggory Warren, Morningstar (Cautiously Optimistic on Greg Abel's future role at Berkshire Hathaway):

  "I hope Abel will speak up more this year and let shareholders see some of the brilliance Berkshire executives talk about."

• Chris Bloomstran, Semper Augustus Investments Group (Bullish on Greg Abel and Berkshire Hathaway's management team):

  "Greg's a rock star... The bench is deep. He won’t have the same humor at the meeting. But I think we all come here to get a reminder every year to be rational."