Warren Buffett, the iconic “Oracle of Omaha,” is about to share his annual insights with eager shareholders and admirers alike. This comes in the wake of significant market events, including a new trade war, devastating wildfires, and some unexpected stock-selling activity within his own firm, Berkshire Hathaway. The highly anticipated annual letter, along with Berkshire’s fourth-quarter earnings report, is set to be published at 8 a.m. ET this Saturday. Investors are particularly keen to hear Buffett’s take on the current market dynamics and the potential impact of both President Donald Trump’s tariffs and the California wildfires on the extensive array of businesses under Berkshire’s umbrella.
While Berkshire doesn’t have a massive presence in California, its substantial reinsurance operation might suffer losses due to the costly wildfires in Los Angeles. James Shanahan, a Berkshire analyst at Edward Jones, noted, “Insured losses appear to be surpassing $40 billion, which is substantial. Berkshire could see considerable exposure here.” Investors and analysts are closely monitoring the earnings report for any wildfire-related disclosures. Brian Meredith of UBS has predicted a $1 billion insured loss for Berkshire Reinsurance, and a $150 million hit for Berkshire Primary. Catherine Seifert, an analyst at CFRA, believes that while Geico, a top auto insurer in California, will face claims, the impact should be manageable.
Buffett might also touch on the recent trade tensions, continuing from his previous extensive comments in 2018 and 2019. Recently, Trump imposed tariffs—25% on Mexican and Canadian goods, and 10% on Chinese imports. Although there was a temporary pause on the Mexico and Canada tariffs, a 25% tariff on steel and aluminum is slated for March. Buffett once described tariffs as “a tax on consumers” and warned they could induce global inflation, negatively affecting consumers. Investors will be scanning Berkshire’s 10K for tariff-related insights, especially for companies that could struggle with importing materials like Canadian lumber.
In the stock market, Buffett appears to still be in a selling phase, having offloaded additional Bank of America shares. Their stake now stands below the critical 700 million share mark, originally acquired with low-cost warrants in 2011. Analyst R. Scott Siefers from Piper Sandler mentioned, “The assumption was that if the shares dropped below 700 million, more sales might follow.” Berkshire’s stock sales have outpaced purchases for nine straight quarters, with its cash reserves hitting a record $300 billion by the third quarter of 2024. Shanahan commented, “This suggests Buffett sees the market, including his own stock, as expensive.”
Lastly, as Buffett continues to smooth the path for his successor, Greg Abel, notable moves have been made. Berkshire attained full ownership of Berkshire Hathaway Energy by buying the remaining shares from Walter Scott’s family. Additionally, the Haslam family sold its lingering 20% stake in Pilot Travel Centers to Berkshire, following the settlement of a significant lawsuit. “He appears to be streamlining the company for a leadership transition,” Shanahan observed. “Buffett would likely aim to set up Abel for success by managing equity investments, resolving lawsuits, and amassing cash to quickly seize major market opportunities that would define the business under his leadership.”
