Warren Buffett and Charlie Munger fielded questions for seven hours during Berkshire Hathaway’s annual shareholder meeting. The duo shared their views on the markets, the economy, politics, and corporate governance among other things.
Of course, they also spoke at length about the health of Berkshire Hathaway, the $360 billion insurance conglomerate with hands in railroads, energy, furniture, underwear, jewellry, and candy.
Here’s Meredith’s quick summary of his takeaways from his 12-page report to clients:
Overall, comments at the annual meeting confirmed our favorable view on BRK’s shares. GEICO’s profitability and growth are beginning to improve after a weak 2015 and BH Primary has very attractive growth opportunities. While BNSF continues to face revenue and profit pressure in 2016, BRK continues to make acquisitions (i.e. Precision Castparts) and investments in its businesses that should enable it to grow earnings faster than the S&P 500. Additionally, BRK’s cash position will be replenished with the redemption of its Kraft Heinz preferred stock in June, leaving it with more than $60bb of cash to make acquisitions.
Here are Gelb’s takeaways from his 29-page report to clients:
Our most important takeaways from Berkshire Hathaway’s annual meeting: 1) Warren Buffett is open to additional (perhaps multiple) acquisitions in the $10-$30bn range. The recently completed $32bn Precision Castparts deal fits the criteria of the types of businesses Berkshire would like to acquire, 2) Berkshire would repurchase a significant amount of shares if its valuation declined to 1.2x book value, 3) The reinsurance market has taken a turn for the worse and the next 10 years will probably not be as attractive as the last decade, 4) GEICO is expected to deliver improved underwriting profits in 2016.
Meredith has a Buy rating and a $244,500 price target on Berkshire A shares. Gelb does not have a rating or price target on the stock, but he is Neutral on the industry.
For a slightly longer summary of the meeting, here are 13 key highlights.
Yahoo Finance exclusively live-streamed Berkshire Hathaway’s annual meeting. Catch the replay at finance.yahoo.com/brklivestream.
Sam Ro is managing editor at Yahoo Finance.
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