OMAHA, Neb. – Berkshire Hathaway Inc. investors will be looking for details of how the conglomerate performed and the best advice CEO Warren Buffett has to offer in his annual letter this Saturday.
Buffett’s letter is always well-read because of his track record, but this year he released a section focused on investing advice early so there may not be many surprises.
“The letters have been straighter (in recent years),” said Andy Kilpatrick, who wrote “Of Permanent Value: The Warren Buffett Story.” ”I think he’s trying to give his thoughts on the businesses.”
But with more than 80 companies within Berkshire and an investment portfolio worth significantly more than $100 billion, Buffett still has plenty of material to work with.
WHAT TO WATCH FOR: Berkshire’s purchase of half of ketchup maker Heinz as part of a $23.3 billion deal was the company’s biggest transaction of 2013. But Buffett hasn’t said much about the investment’s performance.
Berkshire also completed its $5.6 billion purchase of Nevada’s biggest utility, NV Energy, just before the end of last year.
So investors will be looking for more details on both of those deals and several smaller ones Berkshire subsidiaries completed.
Buffett will also discuss why the growth in Berkshire’s book value per share likely failed to beat the S&P 500 index’s performance last year. Buffett has said Berkshire’s size makes hard to continue beating the market because huge deals are needed to significantly improve results.
KBW analyst Meyer Shields said Berkshire’s size and complexity also makes it hard for investors to evaluate.
“Because it’s bigger, it’s harder for any one person to understand what’s going on,” he said.
Shields said he hopes Buffett will disclose more details about Berkshire’s insurance liabilities, particularly for asbestos which has been troublesome for other insurers. Berkshire carries significant asbestos liability because it agreed to take that on for other companies through reinsurance.
BNSF railroad is another important contributor to Berkshire’s profits. Buffett said earlier this week that BNSF is earning about $10 million a day, but regulators have been scrutinizing the railroad industry’s shipments of crude oil.
Many investors would like to see more details about who will take over as Berkshire’s CEO after the 83-year-old Buffett is no longer available, but Shields said he doesn’t expect any new succession planning details this year.
WHY IT MATTERS: Investors follow Berkshire because of Buffett’s remarkable investing track record and because the conglomerate’s results offer a glimpse into a variety of industries.
WHAT’S EXPECTED: The three analysts surveyed by FactSet expect Berkshire to report fourth-quarter operating earnings of $2,495.42 per Class A share.
Operating earnings exclude the value of derivatives and investment gains or losses, which can produce significant swings in Berkshire’s profits. Buffett says operating earnings are a better measure of Berkshire’s performance in a given period.
LAST YEAR’S QUARTER: The Omaha-based company earned $4.55 billion, or $2,757 per Class A share, on revenue of $44.72 billion because of a big paper gain on its investments and derivative contracts.
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Berkshire Hathaway Inc.: www.berkshirehathaway.com