What to expect from Warren Buffett and Charlie Munger

Warren Buffett is set to kick off Berkshire Hathaway‘s annual shareholder meeting Saturday on a high note, with the “Oracle of Omaha” finally back in the deal-making game and the conglomerate’s outperforming stock crossing a key milestone.

With tens of thousands of shareholders in attendance, this year’s “Woodstock for Capitalists” will return in person in Omaha, Nebraska for the first time since 2019 following Covid-19 disruptions. (CNBC will host the exclusive livestream on Saturday starting at 9:45am ET.)

Investors around the globe are waiting to hear from the 91-year-old chairman and CEO, along with his right-hand man Charlie Munger at 98, following a flurry of investment activities — stakes in Occidental Petroleum and HP as well as an acquisition of Alleghany. Not only featuring hours of commentary from the legendary duo, this renowned event will also include exhibits of Berkshire’s wide range of holding companies — from ice cream maker Dairy Queen to insurer Geico and battery maker Duracell.

“This meeting is for people who are diehard value investors, diehard Buffett and Munger fans like I am,” said Whitney Tilson, CEO of Empire Financial Research who has been going to Berkshire’s shareholder meeting for 25 consecutive years. “It’s an opportunity to learn from the masters. It’s just intellectually, psychically and emotionally fulfilling.”

Here are some of the big topics shareholders will want to hear from Buffett:

• Market outlook: The stock market has suffered a correction on fears of inflation and rising rates. How should investors navigate the volatility and a tricky economic landscape?
• Deploying more cash: Buffett has been putting capital to work as of late. Will his buying spree continue? Is he going to pull off an “elephant-sized” deal?
• A slowdown in buybacks: With Berkshire shares significantly outperforming, will Buffett cease or slow down his aggressive buyback program?
• Life after Buffett and Munger: Berkshire’s succession plan
• China, crypto, Russia’s invasion of Ukraine and more

Berkshire shares are riding high in a volatile market. Class A shares achieved a key milestone last month, topping half a million dollars for the first time as investors embraced the safety of the diversified conglomerate during geopolitical turmoil and surging inflation. The stock is up more than 10% this year, compared to a 10% loss for the S&P 500.

In 2020’s annual meeting during the depth of the pandemic, Buffett offered a much-needed reassurance to investors, saying the U.S. economy will withstand this emergency as it has with all of the previous battles and crises.

“Nothing can basically stop America,” Buffett said. “The American miracle, the American magic has always prevailed, and it will do so again. … In World War II, I was convinced of this … I was convinced of this during the Cuban Missile Crisis, 9/11, the financial crisis.”

The macroenvironment has grown increasingly difficult for investors this year as the Federal Reserve rushes to tame down 40-year-high inflation with aggressive tightening. Meanwhile, fears of a recession have crept in after a so-called yield-curve inversion and weak prints in economic data. Not to mention that the U.S. is still not out of woods with the pandemic.

“A lot of people have taken hits in their portfolio outside of Berkshire Hathaway, which has done spectacularly. I think there’s probably more nervousness out there,” Tilson said. “People are looking for wisdom and guidance in a very strange market where there is a war going on and inflation is raging.”

Before the recent buying spree, Buffett had been a net seller of stocks for the past five quarters as he saw few bargains among surging equities.

A big driver for Berkshire’s outperformance over the past year has been its aggressive buybacks. The company repurchased a record $27 billion worth of its own shares last year.

“One might expect buybacks to slow down simply because the price of Berkshire has gone up,” said David Kass, a finance professor at the University of Maryland and a Berkshire shareholder. “Buffett will only buy back shares if he considers them to be at a sufficient discount from intrinsic value.”

There was evidence that a reduction has already started. Berkshire used $6.9 billion to buy back shares in the fourth quarter, slower than the $7.6 billion repurchased in the third quarter. Buffett’s annual letter revealed that the conglomerate bought back $1.2 billion of its own stock through Feb. 23.

Berkshire’s investments lately only made a small dent in his $140 billion-pus war chest, leaving Buffett watchers wonder if a major investment is on the horizon.

“The recent declines in the stock market resulting from the anticipated tightening of monetary policy by the Federal Reserve may provide additional attractive opportunities for Buffett in the near future,” Kass said.

In March, Berkshire agreed to buy insurance company Alleghany for $11.6 billion in cash. This transaction will mark Berkshire’s biggest acquisition in six years when it bought industrial company Precision Castparts for $37 billion, including debt.

Still, Buffett has yet to make the “elephant-sized acquisition” he’s been touting for years. The investor previously blamed an expensive market for his inaction.

Vice Chairman of Non-Insurance Operations Greg Abel has been a top contender for Buffett’s successor for years, and a comment by Munger last year caught some attention of investors.

In a discussion about Berkshire’s future, Munger appeared to unintentionally reveal who might have been designated to eventually replace Buffett as CEO.

“Greg will keep the culture,” Munger said at the 2021 annual meeting.

Investors will look for any formal announcement on the succession front Saturday.