Updated from 8:09 a.m. ET on May 2, with a preview of Berkshire Hathaway's first-quarter financial results and additional information throughout.
NEW YORK (TheStreet) -- Berkshire Hathaway's (BRK.B) shares continue to hit new record highs, as investors await the next big move by the Warren Buffett-run conglomerate, heading into the company's shareholder meeting Saturday.
Berkshire Hathaway's annual meeting, the "Woodstock for Capitalists" as Buffett has said, will provide investors context on the strength of the U.S. and global economic recovery, while also giving shareholders an update on the direction of America's fifth largest company by market capitalization.
Investors are likely to celebrate a 30% rise in the shares of Berkshire Hathaway to new record highs in the past year on gains in the company's $90-billion plus investment portfolio and earnings growth in operating units such as BNSF Railways, MidAmerican Energy and its insurance business, among over 80 subsidiaries.Class-A shares of Berkshire Hathaway opened Friday trading above $163,000, a new record for the company. The Berkshire celebration, however, will also carry somber undertones as investors seek clarity on succession plans for Warren Buffett, the 82-year old investor commonly known as the "Oracle of Omaha." Particularly Scrooge-like Berkshire investors, may want to know who will succeed Buffett and how that will impact financial decisions such as returns of cash to shareholders by way of dividends and share buybacks, as has happened with Apple (AAPL) since the passing of Steve Jobs. For now, investors' eyes will be trained on Omaha, Neb., for Buffett's outlook on making investments in 2013, and any updates on how he plans to run Berkshire Hathaway in coming years. "I'd be curious and I would hope we have a chance to hear more about Warren's appetite globally," Thomas Russo, a partner at Gardner, Russo & Gardner, says of his expectations heading into Berkshire's shareholder meeting. Buffett detailed in Berkshire's annual shareholder letter that the company made about $10 billion in capital expenditures in the U.S. in 2012, 88% of the conglomerate's overall capex, amid rising expectations of economic recovery. "We will keep our foot to the floor and will almost certainly set still another record for capital expenditures in 2013. Opportunities abound in America," Buffett wrote, in the shareholder letter. "I am just curious why he has softened his hunt for global elephants," Russo said, highlighting Berkshire's lack of commentary or activity in international markets, in recent years. Gardner, Russo & Gardner is Berkshire's tenth largest shareholder with a stake of nearly $800 million in the company's Class A shares and over $200 million of Class B shares, according to Bloomberg data. Russo says Berkshire holding's represent about 11% of the firm's assets. On Wednesday, Berkshire said it would buy a remaining 20% stake in Israel-based IMC International Metalworking Companies for $2.05 billion. Berkshire took an 80% stake in the company at a valuation of $5 billion in 2005, and since then has enjoyed a surge in IMC's earnings. "I think he will be willing to talk about big deals around the world," Whitney Tilson of Kase Capital said of Buffett's international deal making. "He is trying to replicate Iscar," added Tilson, referencing IMC. After a February acquisition of Heinz (HNZ), the iconic ketchup maker, Buffett has said he's ready to put the Berkshire pro-forma cash stockpile of over $30 billion to work in large acquisitions. "[We] still have plenty of cash and are generating more at a good clip. So it's back to work; Charlie [Munger] and I have again donned our safari outfits and resumed our search for elephants," Buffet wrote, of his so-called "elephant guns" for M&A. Recent acquisitions such as BNSF Railways, chemicals giant Lubrizol and Iscar, meanwhile, have helped Berkshire's post-crisis earnings growth and will continue to drive investor expectations for new share price records in 2013. "Despite tepid U.S. growth and weakening economies throughout much of the world, our "powerhouse five" had aggregate earnings of $10.1 billion, about $600 million more than in 2011," Buffett wrote, referencing BNSF, Iscar, Lubrizol, Marmon Group and MidAmerican Energy. "Of this group, only MidAmerican, then earning $393 million pre-tax, was owned by Berkshire eight years ago." "[Berkshire] is well positioned to benefit from improving earnings in its non-insurance business as the economy recovers, as well as from robust property-casualty insurance results," Jay Gelb, a Barclays analyst, wrote in a late April note to clients. Gelb will be among two analysts asking questions at Berkshire's shareholder meeting. Shareholders are investing in Berkshire's ownership of operating businesses and the leverage that the company should get from the next five-to-10 years of economic improvement, according to William Smead, chief investment officer of Smead Capital, an investor in Berkshire's B-shares. "I expect Mr. Buffett and Mr. Munger to share how undervalued they still think their stock is... I would love to get reinforced on that," Smead said. The consensus among analysts polled by Thomson Reuters is for Berkshire Hathaway to report a first-quarter profit of $3.3 billion on revenue of $42.2 billion, compared to earnings of $3.0 billion on revenue of $39.2 billion in the first quarter of 2012. Shares of Berkshire Hathaway have gained about 20% in 2013 and are within reach of all-time highs hit earlier in the year.
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