Succession, derivatives on tap in Buffett letter

By @ibtimes on

Don't bother calling your favorite value investor on Saturday morning -- he or she will be busy devouring every last word of annual wisdom from the guru of that investing discipline, Warren Buffett.

Buffett's Berkshire Hathaway will release its letter about the previous year at 8 a.m. EST on Saturday, just as it has done in most years past. That will give investors the whole weekend to digest the 20 or so pages of detail from the 80-year-old Oracle of Omaha.

Buffett's letter touches on everything: the performance of the company, the wisdom of his investing philosophy, the merits of various executives, and even the bargain buys that shareholders can snap up from Berkshire portfolio companies -- from jewelry to chocolate to auto insurance -- if they attend the firm's annual meeting in Omaha in April.

Long-term Berkshire investors will want answers to some key questions, including how the company ended the year and what steps it's taking to plan for a future without Buffett.

I expect that you're going to see a great number, said Michael Yoshikami, president of wealth manager YCMNET Advisors in California and a Berkshire shareholder.

Yoshikami said he is also hoping for some answers as to why Berkshire's equity portfolio shrank to only 25 stocks in the fourth quarter.

When I saw that, the first thing I thought is he's cleaning the portfolio for someone to take over, he said.

The letter is expected to provide incremental insight on the hot-button question of Buffett's succession. Though he says he expects to live into his 90s, he has also pointed to the need for a CEO and a team of investment managers to succeed him when he does pass.

Last year, Berkshire named little-known fund manager Todd Combs to look after part of its portfolio, and the expectation is that more investment managers are coming, though it is not clear when or how much control they will have.

Buffett is unlikely to say much about the CEO role, which is most often linked to NetJets and MidAmerican Energy chairman David Sokol.

The company owns dozens of business, from candy maker See's to railroad Burlington Northern, and many of those operations are cash cows. Berkshire had more than $34 billion cash at September 30, and while Buffett famously likes having a big cushion, some wonder if he is gearing up for an acquisition.

I think he's pretty much going to say he's going to hold cash until he sees what happens with interest rates, Yoshikami said.

(Reporting by Ben Berkowitz; Editing by Gary Hill)

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