Here’s what to expect from Warren Buffett at Berkshire Hathaway’s first annual virtual meeting

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Warren Buffett, President and CEO of Berkshire Hathaway Inc

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This year’s Berkshire Hathaway shareholders’ meeting will be like no other as investors seek insight into how the conglomerate will emerge from the coronavirus pandemic and its future.

The meeting will take place on Saturday but, unlike in previous years, there will not be a crowd of shareholders swarming with leaders, President Warren Buffett and Vice President Charlie Munger with questions. Instead, the meeting will be held virtually, the answers to the questions will have already been submitted and Munger will not be there.

This year’s meeting comes at a critical time for Berkshire. Shareholders want clarification on Berkshire’s leadership to move forward and with its huge cash pile, many owners are wondering if the “Oracle of Omaha” found attractive investments amid the pandemic downturn in actions.

“Cash is not paying anything right now, so it’s up to it to take some of that capital and deploy it,” said Greg Womack, president of Womack Investment Advisers, which owns Berkshire shares.

What will Buffett do with his huge stack of cash?

Berkshire had more than $ 120 billion in cash at the end of last year. Buffett said in his 2019 letter to shareholders that he was looking to make an “elephant-sized” acquisition, but noted that the ratings were too high.

In 2020, however, the coronavirus epidemic drove stocks to record lows in a bear market, lowering valuations. The S&P 500 fell more than 35% from its February 19 record high to its March 23 low. However, the broader market index rebounded by more than 28% from this trough.

Buffett has used declines like this to make moves in the past. During the 2008 financial crisis, Buffett made special investments in Goldman Sachs and Bank of America.

But Buffett remained unusually calm this time.

In an interview with The Wall Street Journal, Munger said that Berkshire was conservative during this pandemic.

“We are like the captain of a ship when the worst typhoon ever arrives,” Munger told the newspaper. “We just want to pass the typhoon, and we prefer to get out of it with a lot of cash. “

But Womack believes that some of this money can be reinvested in some of Berkshire’s existing holdings, given their loss. “As far as what they have and what value could be out there, finance is a big area,” he said.

Bank of America shares have fallen more than 30% since the start of the year, while Goldman Sachs has fallen 22%. Wells Fargo is down over 48% for 2020 and JPMorgan Chase has lost 33% of its value. American Express has been down almost 30% since the start of the year.

Cathy Seifert, analyst at CFRA Research, thinks it may be prudent for Berkshire to keep some “dry powder” given its large insurance and reinsurance business and the potential losses to these businesses amid the pandemic of coronavirus.

“Berkshire is also an insurance company, and what we have right now is an insurance event,” said Seifert. “Berkshire also has a very large reinsurance business. “

“Something that does not tend to be a priority, but perhaps should be, is their level of exposure to the pandemic in the reinsurance industry,” said Seifert.

According to broker Willis Towers Watson, insurance losses related to the coronavirus epidemic could range between $ 32 billion and $ 80 billion in certain classes in the United States and the United Kingdom. This would exceed the total claims for the September 11 attacks.

Certainly, UBS analyst Brian Meredith thinks the risk of Berkshire coronavirus is “manageable.”

He added that Berkshire’s treasury “and a strong balance sheet will allow it to weather the economic downturn better than most companies, in our opinion, and will potentially give it opportunities to use its cash to make acquisitions at attractive prices ”.

Greg Abel goes on stage with Buffett

Questions about who will be Buffett’s successor will also arise before the meeting, especially since Munger, 96, will not answer questions from shareholders alongside Buffett and will be joined by the vice president of operations. non-insurance, Greg Abel.

“I guess we are starting to see changes happen with Mr. Abel [Munger’s] “Said Womack of Womack Investment Advisers.” It makes sense. At some point, you have to start giving the baton. “

Womack noted that Abel appears to have been prepared to take over in recent years.

Abel, 57, was promoted to office in 2018 and even answered questions at last year’s general meeting. Previously, he was President and CEO of Berkshire Hathaway Energy.

His promotion – as well as his answers to questions at last year’s meeting – were seen by Buffett as an indication that Abel was in the running to succeed Buffett, who is now 89 years old.

“I would say you consider Greg to be the person who will take over the presidency of Berkshire at some point,” said Womack.

—Michael Bloom of CNBC contributed to this report.

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