What To Expect From Berkshire Hathaway And Warren Buffett This Weekend

Warren Buffett’s Berkshire Hathaway (BRK.A; BRK.B) will host its annual meeting this weekend, with up to 30,000 shareholders expected to make the yearly pilgrimage to hear the Oracle of Omaha’s market ideas.

Estimates from Visible Alpha, based on limited analyst projections, put Berkshire's total revenue for the first quarter at $83.8 billion, up 22% from a year ago. Net income is also expected to rise to $8.32 billion, up a whopping 52% from the prior-year quarter. Berkshire’s return on equity is expected to be 6.8%, up from 4.57% in the same period last year.

One area of its financial statement that should boost earnings is its "Investments and Derivatives," where the company took big losses last year. The company's investments are expected to profit $790 million, swinging from last year's $1.5 billion loss as markets wobbled. Its insurance arm is also expected to increase net income $600 million, or 49%, over the previous year.

Buffett, 92, and his Vice Chairman Charlie Munger, 99, will take questions for around six hours on Saturday. While inflation and Fed rate hikes were hot topics for the pair last year, there may be a lot of interest surrounding the value investors’ thoughts on the recent regional banking turmoil. 

Buffett's OXY and Japan Bets

Berkshire Hathaway did not make any substantial bet during the regional banking crisis, but Buffett assured investors that although more banks could fail, “dumb” management actions would not hurt depositors.

The big news of the first quarter for Buffett was the disclosure of a $4.2 billion investment in HP (HPQ). Berkshire’s largest holding in recent years has been fellow tech firm Apple (AAPL), and the company has now built an 11% stake in HP.

Shareholders will be interested to hear Buffett and Munger’s outlook on the energy industry after a recent downturn in oil and gas prices. Berkshire raised its stake once more in Occidental Petroleum (OXY) in March, bringing its ownership stake to 22.2%. Buffett met with Occidental CEO Vicki Hollub “a few days” before upping his stake and may share further insight at the annual meeting.

Berkshire Hathaway tends to focus on domestic companies, but the company made headlines in April when it upped its stake in several Japanese trading firms. Trading firms in Japan are akin to large conglomerates with a wide range of business segments. Buffett raised his stake to 7.4% from 5% in five trading houses—Itochu Corp, Marubeni Corp, Mitsubishi Corp, Mitsui & Co, and Sumitomo Corp.

Trading firm founder Samantha LaDuc told Yahoo that Buffett was “ahead of the game” in buying up these trading houses which are “instrumental” to the Japanese economy. Berkshire gets leverage in commodities and upside from an eventual increase in Japanese interest rates.

Buffett and Munger have long been critics of some corporate activities, saying in the last annual letter that “bold imaginative accounting” was one of the "shames of capitalism". Buffett also criticized overpriced share buybacks.

The veteran investors will likely pull no punches in their assessment of the recent banking crisis.

"Sometimes they [banks] go broke because they make too many dumb loans, and sometimes because they mismatch maturities," Buffett said at the time. However, he added that it was not a repeat of 2008 as the quality of loans was not poor, but the mismatch in assets and liabilities was the problem.