Buffett Invites Berkshire Bear Back to Annual Shareholder Meeting
We "will again have a credentialed bear on Berkshire," Buffett said in his shareholder letter, released on Saturday morning. "We would like to hear from applicants who are short Berkshire (please include evidence of your position)."
Berkshire shares have under-performed the S&P 500 index in the past 12-months, amid a sharp rise in stock markets in 2013. Over the past 12 months, Berkshire shares have risen more than 14%, while the S&P 500 has risen in excess of 22%.
On Saturday, Berkshire reported better-than-forecast operating earnings as the Warren Buffett-run conglomerate continues to see its earnings rise amid a slow but steady recovery of the U.S economy.
Berkshire Hathaway reported operating earnings of $3.7 billion for the fourth quarter of 2013, a 34% increase from year-ago levels. When counting investment and derivative gains of $1.2 billion for the fourth quarter, Berkshire Hathaway reported net income of just under $5 billion for the fourth quarter, a new record.
Analysts forecast that Berkshire would earn $46.3 billion in revenue and operating income of $3.5 billion, according to Bloomberg data. While Berkshire's revenue was projected to rise, analysts forecast profits at the conglomerate would drop.
Book value per Class A share rose to $134,973 for the full year, an 18% increase from the company's book value per share of $114,214 at the end of 2012. Berkshire's gain in net worth during 2013 was $34.2 billion, according to the company.
Those gains allowed Berkshire Hathaway to outperform the S&P 500 Index over the years between 2007 and 2013, however, book value has grown at a slower rate than broader indices over the past five years. In Berkshire's 2012 letter to shareholders, Buffett cautioned investors that the firm might underperform the S&P 500 over a five-year stretch ending in 2013.
Kass, last year's credentialed Berkshire bear, said in a recent article that "Buffett's moats are breached" as some of Berkshire's big four stock positions, like IBM
Buffett, in his shareholder letter, said that Berkshire Hathaway had increased its investment in the firm's big four investments: Wells Fargo
"We purchased additional shares of Wells Fargo (increasing our ownership to 9.2% versus 8.7% at yearend 2012) and IBM (6.3% versus 6.0%). Meanwhile, stock repurchases at Coca-Cola and American Express raised our percentage ownership," Berkshire said.
"For the four companies in aggregate, each increase of one-tenth of a percent in our share of their equity raises Berkshire's share of their annual earnings by $50 million," the company added. At the 2013 investor meeting Kass questioned whether Berkshire had grown too big to outperform markets. He also asked Buffett if Berkshire should begin selling or spinning off businesses in its sprawling financial empire. Berkshire's businesses span insurance, energy, railroads, aviation and a large investment portfolio.