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Warren Buffett to weigh in on how Berkshire fares after pandemic

(Bloomberg) – A year after Warren Buffett revealed he was offloading airline stocks as the pandemic sets in, shareholders at Berkshire Hathaway Inc. are eager to know what will come next for the conglomerate with more Americans emerging from lockdown. The CEO will speak to shareholders via video conference to comply with health guidelines, canceling for a second year an arena event in Omaha, Nebraska, which has typically drawn thousands of adoring fans. He will likely recount how the global crisis impacted some of the company’s high-profile activities while strengthening others. Investors will seek information on the pulse of the US economy from Buffett, whose company owns. BNSF railway and has a stake. “The first thing we’re going to look for is behavior on his part that should reflect a greater degree of confidence and visibility into the impact of the pandemic,” Cathy Seifert, analyst at CFRA Research, said in an interview. At last year’s meeting, as uncertainty continued to plague businesses and markets, Seifert “felt he was really scared,” she said. A Berkshire representative declined to comment ahead of the meeting. striking a subdued tone amid the uncertainty of the pandemic, as he sat away on stage from his deputy Greg Abel. Buffett, 90, moved the meeting to Los Angeles this year, where his longtime business partner and Berkshire Vice President Charlie Munger, 97, resides. largely in the dark recently about how he sees the fallout from the Covid-19 crisis. His 15-page annual letter in February only mentioned the pandemic once: One of his furniture companies had to shut down for a while because of the virus, the billionaire noted on page 9, but some of his his other businesses have also felt the strain. The pandemic has weighed on sales of retailers such as See’s Candies and party supplies supplier Oriental Trading Co. Precision Castparts, a manufacturer of equipment for the aerospace and energy industry, was largely behind the $ 11 billion depreciation Berkshire took last year when the virus slashed demand for flights. . But Geico reported lower losses as closures reduced the level of leadership across US kitchen supply vendor Pampered Chef posted higher revenues in 2020. “There are lots of opportunities for him to probably share really interesting information about the pandemic, ”Jim Shanahan, an analyst at Edward D. Jones & Co., said in an interview. “He could probably be talking about parts of the country that have seen stronger recoveries at this point and parts of the country that are lagging behind that some leaders cannot do.” Whatever comment he makes, Berkshire has shaken things up among its investments since last year’s meeting. The company, which ditched shares in airlines including Delta Air Lines Inc. and Southwest Airlines Co. in early 2020 as the pandemic crushed travel, reduced its bank holdings over the course of the year. last year as part of a major shift for a portfolio that had around 41% of its fair value concentrated in banks, insurers and financials at the end of 2019. Potential theme could be how businesses adjust as the recovery goes: With vaccine roll-out, large companies are re-examining everything from customer demand to their plans to return to the office. JPMorgan Chase & Co. said this week that U.S. staff should expect to return to a rotating basis in July. Other companies, including Mitsubishi UFJ Financial Group Inc., are considering ways to reduce the real estate footprint in regions such as the Americas. Other topics the meeting could cover: Spending this CashBerkshire ended 2020 with more than 138 billion dollars in cash, even after spending a record $ 24.7 billion in redemptions last year. The constantly swelling pile is weighing on shares of the conglomerate, with Berkshire Class A shares falling short of the S&P 500’s 102% price gain over the past five years. “We expect capital management to be a key topic again at this year’s annual meeting,” UBS Group AG analysts led by Brian Meredith said in a note to clients on April 26. They estimated that Berkshire had repurchased around $ 5 billion of its shares in the first quarter. Buffett’s desire to take even more of Berkshire’s own shares provided the billionaire investor with another means of deploying capital, d ‘especially as the popularity of special purpose acquisition companies creates the environment. for even more competitive covers. Saturday’s profits should give investors an idea of ​​how much money he spent on buybacks in the first three months of the year, with Berkshire able to close a few deals last year. The company invested in five Japanese trading houses and bought natural gas assets from Dominion Energy Inc. But the conglomerate was foiled at the start of the pandemic when the federal government stepped in to help companies that might otherwise have turned their backs. towards Berkshire as a safe haven. “There will be questions about that, too, because if anything, there is as much or more capital on the sidelines competing with it than before,” said Shanahan, referring to the Berkshire negotiation. “PSPC was kind of a new wrinkle.” Biden EraBuffett has been careful to tread lightly on political matters in recent years. Although he has campaigned for the candidates in the past, he has mostly been silent on last year’s election.With President Joe Biden’s new tax plan and infrastructure proposal now doing the trick, Buffett could weigh on their potential impact on both the economy and Berkshire. Climate change, DiversityBerkshire faces two shareholder proposals at this year’s meeting, one on climate change and the other on diversity and inclusion. Both seek to push the company to release more information about its efforts on these fronts. The board advises investors to vote against the proposals, while recognizing that managing climate risk and tackling diversity are important issues. Buffett has long said that Berkshire’s decentralized approach – where each subsidiary runs their own business with very few functions for the conglomerate – makes producing multiple comprehensive reports or finding ways to report data consistently for companies. also varied. Each unit should face these risks individually, according to Buffett. The company is also facing relocations from two proxy consulting firms. Glass Lewis has recommended not voting or voting against the election of audit committee chairman Thomas Murphy, citing the lack of disclosure of climate change risks. Institutional Shareholder Services advised that votes be withheld for four board members due to ineffective compensation oversight. “I don’t recall there ever being a problem with any of the proxy soliciting companies against a roster of directors,” Seifert said. On the specific topics of climate change and diversity, “for Berkshire, turning a deaf ear and blind eyes to them, at best, seems deaf to me.” SuccessionBuffett regularly faces questions about inheritance given his age and the length of his tenure. But in 2018, he took a step forward in addressing the issue by promoting Greg Abel and Ajit Jain to vice presidents, alongside Munger. Abel and Jain will both be at the meeting. One lingering question is Todd Combs’ role as the head of Geico. Combs, a portfolio manager alongside Ted Weschler, took on the auto insurer’s management position in a move Buffett called temporary. Any update on his responsibilities could be essential, Shanahan said. Stock Market Many investors tune in to Buffett’s annual meetings to hear his thoughts on the stock market. This year features new themes that he could tackle, following the mania surrounding GameStop Corp trading. and the drama with Robinhood Markets Inc., Hunger criticized online brokers who attract inexperienced retail investors, saying they primarily offer gambling services. His comments in February also hit companies that offer commission-free transactions. , which he called the most “disgusting” lies. “Robinhood trades are not free,” Munger said. “When you pay for the order flow, you’re probably charging your customers more and pretending to be free. It is a very dishonorable way of speaking. And no one should believe that Robinhood trades are free. For more articles like this, please visit us at bloomberg.com Subscribe now to stay ahead with the most trusted source of business information. © 2021 Bloomberg LP

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