Warren Buffett's famed annual letter to shareholders will be released Saturday. One of the most anticipated investment publications each year, the letter is Buffett's only substantive written communication each year to what he terms his "partners," the shareholders at Berkshire Hathaway ( BRKA).

While the letter is part of the company's annual report, investors are much more interested in what Buffett says about the economy, the market, executive compensation and other world events than they are on his take of Berkshire subsidiaries like Acme Brick or Dairy Queen.

While many have reported that the contents of the letter are a well-kept secret, there are some obvious targets for Buffett's sometimes sharp pen in this year's letter. I'd watch for the following topics when the letter is released early Saturday morning:

  • The equity markets aren't cheap. This is a Buffett tradition, talking cautiously about the market while saying he sees value in certain areas and stocks. Buffett's love has always been deep value investing. In fact, one could argue that without Charlie Munger, Warren Buffett wouldn't have found many of the stock market opportunities that have made Berkshire what it is over the past 20-plus years. The Oracle of Omaha is likely to opine that sustainable, long-term market growth of high-single-digits to low-double-digits is realistic.

  • There is a decent possibility Buffett will break with tradition and spend more time on macroeconomic issues. Berkshire's growth in manufactured housing and the importance of the economy to the reinsurance business isn't lost on this master and he is likely to address the economic drivers for Berkshire's operating businesses. And if history holds, Buffett tends to spend more time -- either in his letter or at the annual meeting -- discussing larger economic issues at inflection points.

  • Buffett (with the help of Munger) will likely spend some time talking about the corporate scandals of the year, including trials and the mutual fund issues. Without predicting the outcome, I can't wait to read what he has to say about Spitzer, the Securities and Exchange Commission and the happenings at the New York Stock Exchange. As always, Buffett's indignation will be closely watched by investors, as will any suggestion to move toward more open markets.

  • Berkshire continues its transformation from what many considered Warren Buffett's mutual fund to a conglomerate of operating companies with Buffett as the capital master. As such, he is likely to spend very little time on his public stock portfolio and pay much more attention to the ups and downs of Berkshire's operating businesses. He will also use lots of ink to describe the insurance business, especially the reinsurance businesses and Geico, along with the lizard.


There will always be a surprise or two as well. But no worries: For the sixth straight year, we will provide complete analysis of Buffett's penmanship in our Saturday morning review of his comments.
Christopher S. Edmonds is vice president and director of research at Pritchard Capital Partners, a New Orleans energy investment firm. He is based in Atlanta. At time of publication, neither Edmonds nor his firm held positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Edmonds cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to cedmonds@realmoney.com.

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