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Why Berkshire’s Annual Meeting Will be Happy

Carla Fried

Berkshire Hathaway (BRK-B) shareholders are trained to focus on the long-term, but even they are human, and for the past few years the stock’s performance in the 12 months between annual meetings hasn’t delivered much in the way of feel-good returns.

Here’s the 2009-2010 timeframe:

BRK.B Chart

And the 12 months to the 2011 annual meeting:

BRK.B Chart

Same story for the 2012 annual meeting, though the lag was small.

BRK.B Chart

That brings us to this year’s annual meeting, scheduled for May 4th. Short of some sort of massive implosion over the next two weeks, as seen in a stock chart, Berkshire Hathaway shareholders won’t need the sugar rush of a pound of See’s Candies to feel good.

BRK.B Chart

As that last chart shows, Berkshire has pulled away since late last year. That’s right about when economic indicators were signaling continued growth (albeit slow) was more likely than a slide back into recession. For all the attention to the less-cyclical insurance businesses within Berkshire’s operating portfolio, much of its business operations are economically sensitive. And with the economy looking more better than worse, those elements are delivering. Last year, net earnings from railroad behemoth BNSF rose 16%. Berkshire’s energy investments (MidAmerican Energy) managed a 10% rise in net earnings in a less-than-roaring demand cycle. And the manufacturing, service and retail segments of the Berkshire conglomerate posted a 21.8% gain in net earnings.

The question is whether you think the economic growth story has legs. Seabreeze Partners hedge fund manager Doug Kass clearly does not. For the first time, this year’s panel of professional inquisitors lobbing questions to Warren Buffett and Charlie Munger at the annual meeting will include Buffett’s handpicked bear rep: Kass.

Kass confirmed in early March when he was named the resident bear for the Berkshire annual meeting that he was shorting the stock. As recently as April 12th he tweeted “some short ideas for a slowing global economy might include the banks, BRK.B….”

Berkshire stock is up more than 4% since Kass was named to the panel. Should make for some interesting back-and-forth on May 4th.

Carla Fried, a senior contributing editor at ycharts.com, has covered investing for more than 25 years. Her work appears in The New York Times, Bloomberg.com and Money Magazine. She can be reached at editor@ycharts.com.

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