5 things to watch out for during the Berkshire Hathaway AGM

Warren Buffett, Charlie Munger

Berkshire Hathaway Chief Executive Officer (CEO) Warren Buffett is all set to chair the most recent instalment of the Annual General Meeting (AGM) of the firm, along with his compatriot and partner, Vice-Chairman Charlie Munger, on May 6, 2023.

This annual meeting is only the second one Buffet has held in-person since 2019. Last year’s event came hot on the heels of Berkshire’s deal for insurer Alleghany Corp., and a buying spree that built out stakes in Occidental Petroleum and HP.

Investors throughout the globe will closely follow the meeting and will have plenty to look forward to as they contend with elevated market volatility, turmoil in the banking sector, and a hawkish US Federal Reserve (the Fed), that’s taken aggressive steps to contain inflation.

Markets have been volatile this year. Hence, a bit of the usual Buffett and Munger wisdom during the meeting will go a long way in helping investors make correct investment calls during times of market volatility.

It is to be noted that Berkshire has been less active since the buying spree of last year — there haven’t been any major announcements since then. Buffett’s legendary stock-picking has also been more muted since last year, with the conglomerate demonstrating greater interest in retaining cash rather than piling into new businesses.

Berkshire Hathaway, though, turned heads when it took a stake in Taiwan Semiconductor Manufacturing Co (TSMC), only to slash its position by 86 percent the next quarter. Buffett made the decision due to concerns over geopolitical tensions between the US and China, even as he praised the chipmaker from Taiwan.

The benchmark Dow Jones and S&P 500 indices have remained flat for the past one year, and investors have also had to deal with turmoil in the banking sector and fears of an impending recession in the US economy.

The Fed, along with the US treasury and the Federal Deposit Insurance Corporation (FDIC), has done its best to contain contagion following the collapse of the Silicon Valley Bank. With the recent 0.25 percent hike on May 3, the 10th consecutive hike since March 2022, it also appears to have reached the end of its rate-hike cycle.

Here’s what to look out for at the event

Succession plan

Given the age of Buffett (92) and Munger (99), shareholders will want  clear answers on the succession plan of the insurance behemoth. Greg Abel, who is Chairman and CEO of Berkshire Hathaway Energy, and Chairman of the non-insurance operations of Berkshire Hathaway since January 2018, looks fit to take over the responsibility of the firm, subject to the approval of Buffett and Munger.

Japan investments

Both Buffett and Munger will also be questioned by investors on their most recent Japan investments and the rationale behind the same. Buffett invested in the country's leading houses — Itochu, Mitsubishi, Mitsui, Sumitomo, and Marubeni.

Buffett said Berkshire now owns 7.4 percent of each company — its biggest position outside the US and Europe. The value investor told CNBC in a recent conversation that the companies were, "selling at what I thought was a ridiculous price." Hence, investors might look for an update from him on the same.

US banking turmoil

Berkshire Hathaway is known for making prescient calls during periods of immense crisis. Its $5 billion investment in Goldman Sachs during the peak of the 2008 financial crisis, along with a similar investment in Bank of America in 2011, both turned out to be excellent calls.

Hence, investors will be keen to listen to the views of both Buffett and Munger on the current banking crisis unfolding in the US, in which three US banks, including the Silicon Valley Bank (SVB), have collapsed since March.

It is also to be noted that Buffett stated during a recent conversation with CNBC that given the current state of the economy, the US hasn’t seen the last of bank failures, and that his enthusiasm for the sector was waning.

Inflation

Investors will also be keen to know the views of Munger and Buffett on the inflation and how the rate hike trajectory will play out going ahead.

Biden, jobs, war

The Berkshire Hathaway AGM this year comes a day after the latest job numbers, and Biden’s commentary on the outlook for the US economy. Hence, investors will keenly watch out for the views of Buffett and Munger on the job numbers, Biden’s prospects in the 2024 elections, and the ongoing Russia-Ukraine war.