Warren Buffett clearly stated in his letter to shareholders that he will once again play host to a credentialed bear at Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s annual meeting on May 3, 2014. The Oracle of Omaha said that he would like to hear from applicants who are shorting his company’s stock. Last year, Buffett invited Doug Kass of Seabreeze Partners to act as a Berkshire bear.
Warren Buffett’s big positions losing their moat?
Last year’s credentialed bear Doug Kass recently said on The Street that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s moats are breached. Two of Warren Buffett’s big four stocks, The Coca-Cola Company (NYSE:KO) and International Business Machines Corp. (NYSE:IBM), struggled to increase their revenues last year. Berkshire’s investment in these two stocks is close to $30 billion. Kass said the latest earnings reports of IBM and Coca-Cola indicate that their moats are vanishing. IBM is affected by the penetration of cloud, while the soft drink giant’s moats have weakened by healthier drink choices.
Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) stock underperformed the broader S&P 500 index last year as stock markets rallied. While the S&P 500 gained a staggering 32.4% in 2013, the per-share book value of Berkshire increased just 18.2% in the same period. The Omaha, Nebraska-based business conglomerate reported better-than-expected operating earnings on Saturday as the U.S. economy continues to recover.
Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) posted Q4 2013 operating earnings of $3.7 billion, up 34% YoY. Including investment and derivative gains of $1.2 billion, the company’s net profits reached a new record of $4.9 billion during the fourth quarter. Analysts polled by Bloomberg were expecting $46.3 billion in revenues and $3.5 billion in operating income.
Warren Buffett confident to beat the S&P 500 in the current cycle
In his 2012 letter, Warren Buffett cautioned investors that the company might underperform the S&P 500 index over the stock market cycle of five years ending 2013. It was the first time since 1965 that Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s failed to grow as much as the S&P 500 over a five year stretch. Warren Buffett said it doesn’t mean he is going to change his “yardsticks.’ The wise old man is confident that he will beat the index in the current five-year equity market cycle.
Between 2008 and 2013, the per-share book value of Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) surged 91% to $134,973 on December 31, 2013. But the S&P 500 index returned 128% in the same period, including dividends as stock recovered from their 2009 financial crisis lows. However, Berkshire’s book value number is an after-tax figure, while the index gains are pre-tax.