Berkshire Hathaway's (NYSE: BRK-A ) (NYSE: BRK-B ) annual meeting -- the so-called Woodstock for capitalists -- takes place this weekend. While the Q&A format has changed this year -- questions were submitted in advance -- shareholders will no doubt be interested in the following four topics:
1. Berkshire Hathaway's succession plan
Every year that passes means we are a year closer to Buffett's death. It is quite natural, then, that shareholders are increasingly interested in his succession plans, given that the man and the firm he built are so intertwined. A new name has surfaced, courtesy of Alice Schroder, Buffett's biographer: Byron Trott, Buffett's investment banker at Goldman Sachs. Buffett has praised Trott publicly, and there are probably few people outside Berkshire who understand the firm as well as he does.
Don't expect Buffett to name his successor(s) this weekend. But he may be inclined to give more details concerning the structure of leadership after he has moved on, along with other steps he has taken to protect the integrity of Berkshire's culture and operations. In the same spirit, board member Bill Gates, co-founder of Microsoft (Nasdaq: MSFT ) , recently announced that his own commitment to Berkshire is "a lifelong thing."
2. Buffett's derivative bets
Buffett's sale of puts on major world stock indexes is a source of handwringing among shareholders and pundits, some of whom see an inconsistency between these positions and Buffett's criticism of derivatives. Buffett wrote about these positions in some detail in his most recent annual letter in order to explain how he thinks about these bets.
Nevertheless, I expect that the topic will come up again, as mark-to-market losses cloud shareholders' assessment of what looks to me like classic Buffett: being well-compensated to take on a large potential exposure to risks that he understands well. I'm convinced that he hasn't gone insane.
3. Investment opportunities
In recent years, Buffett has complained that he faced increasing competition for deals from financial buyers like private equity firms, but between credit drying up and skittish limited partners, private equity has mostly hit the sidelines for the time being. This creates opportunity for a cash-rich investor like Buffett, who doesn't need to rely on the capital markets to finance transactions.
Keep your ears open for what Buffett has to say on deal flow. Are many more ideas being brought to him? Are there more family businesses up for sale? What about deals abroad? Don't expect him to name potential targets or even sectors of interest, but he could indicate whether there are any large deals in the pipeline.
4. Public securities portfolio
Given the size of Berkshire's equity portfolio, there was no way it could escape the bear market in 2008. Shareholders may be interested to hear his views on his investments in companies such as ConocoPhillips (NYSE: COP ) , Johnson & Johnson (NYSE: JNJ ) , and U.S. Bancorp (NYSE: USB ) , the shares of which are all changing hands well below Berkshire's reported cost.
I certainly expect these four topics to garner attention, but it'll also be interesting to look for any surprises -- Buffett's usually able to produce one or two every year.