Warren Buffett’s annual letter to shareholders is due Saturday, giving everyone an opportunity to peek behind the curtain at Berkshire Hathaway’s balance sheet, earnings and revenue growth, as well as other metrics to assess the company’s overall health.
Buffett’s letter has become an annual ritual for the entire investment community to pour over, looking for any broad market tidbits that can be gleaned.
Per Business Insider:
“Beyond the numbers, investors are eager to read Mr. Buffett’s annual letter,” equity analysts led by Kai Pan wrote in a note out Tuesday.
Analysts say interest is particularly high in the company’s investments, share buybacks, potential deals and updates on specific initiatives like the healthcare joint venture between Berkshire, JPMorgan and Amazon.
Analysts also said they’re most interested in Berkshire’s Apple holdings, of which it sold some three million shares this week, and the “unusual case” of its Oracle investment. Berkshire bought into Oracle in the third quarter of 2018 and then abruptly sold in the fourth, which goes against Buffett’s typical long-term investment philosophy.
The trimming of Apple shares caused the stock’s price to drop.
Additionally, the analysts are looking for any guidance Berkshire might provide on its share-buyback program. This quarter’s update could be particularly notable, the analysts said, because the company’s board of directors recently loosened its policy for buying back stock.
Berkshire bought back nearly $928 million worth of shares in the third quarter, at a price of about 1.35 times the third-quarter book value per share. Buffett and Berkshire’s vice chairman, Charlie Munger, said they would authorize stock buybacks when the repurchase price falls “below Berkshire’s intrinsic value.” Prior to the decision, the company would not buy back stock above 1.2 times book value per share.
“This could be the new ‘floor’ below which Messrs. Buffett and Munger would consider the stock materially below its intrinsic value,” they wrote, referring to the 1.35 times valuation.
On the deal front, Morgan Stanley is looking for whether Buffett sees any acquisition opportunities after last year saying he believed deal valuations were too high.
The analysts said Buffett could discuss a host of other topics — anything from management succession and trade to tax reform, immigration, and “heightened natural catastrophes.”
In last year’s letter, Buffett said Berkshire’s insurance business posted a loss for the first time in 14 years, on the backs of the hurricanes Harvey, Irma, and Maria.
As far as its quarterly earnings go, Morgan Stanley expects a 64% year-over-year rise in operating income. The bank also expects Berkshire’s book value to have increased by 1% in 2018 — the slowest such pace since the 10% decline in 2008.