Inflation Pressures
The U.S. is confronting some of the highest inflation in decades, which is sure to affect Berkshire’s broad mix of businesses. Buffett raised the issue at least year’s annual meeting, when he cited a “buying frenzy” by consumers.
“The one potential soapbox issue that he could talk about is the nature of inflation and how much of it is justified and how much of it is price-gouging,” Cathy Seifert, an analyst at CFRA Research, said in a phone interview. “That is a position that I think people would also like to hear him talk about.”
Inflation and supply-chain pressures were already starting to show up in Berkshire’s businesses through the end of the third quarter. Its building-products makers, which include Shaw flooring and Benjamin Moore paints, reported that supply-chain disruptions contributed to “significant cost increases” for important materials, leading to higher prices.
Berkshire Energy
The conglomerate has a strong foothold in the energy sector, through its utility businesses in states such as Utah, Nevada and Iowa, natural-gas pipelines, and even operations in the U.K. Climate-change concerns have prompted a push toward renewable sources of energy.
Buffett touched on the topic in last year’s letter, saying that Berkshire Hathaway Energy has committed to reworking and expanding part of the grid out West as a “societal necessity.”
Berkshire has proposed a wind and solar project that could be among the renewable industry’s biggest if approved. The $3.9 billion effort would bring 2,042 megawatts of wind generation and 50 megawatts of solar power to Iowa.
Management Moves
Buffett’s company has been moving managers around. Earlier this month, it named energy executive Alicia Knapp to Kraft Heinz Co.’s board alongside Abel. Kraft Heinz has historically been a big deal for Berkshire, which helped create the packaged-food giant and continues to hold an investment in the firm. So any details about Knapp and her role at Berkshire could prove interesting.
Last year, Berkshire elected two new board members, Buffett’s daughter Susan Buffett and fund manager Christopher Davis. Then this month, Tom Murphy, a director for nearly two decades and a longtime friend of Buffett, said he would resign after battling Covid-19. It’s unclear whether Berkshire plans to fill his board seat.
Berkshire also has one particularly interesting longer-term management mystery. Berkshire elevated Combs, a top investing deputy who manages billions of dollars, to CEO of auto insurer Geico at the start of 2020. Months later, Buffett said he hoped that Combs wasn’t going to be there very long, but Geico still hasn’t named a new CEO. Changes at Geico have been announced in Buffett’s letter before, including the news that longtime CEO Tony Nicely had quietly stepped down in 2018.
Leadership at Geico is “critical” because of the intensity of the auto-insurance industry, according to KBW’s Shields. State Farm Mutual Automobile Insurance Co. ranked as the biggest seller of U.S. personal auto policies in 2020, with Geico right behind and Progressive Corp. at No. 3, according to data from the National Association of Insurance Commissioners.
“The competition is so fierce,” Shields said. “It’s such a high-profile role.”
This article was provided by Bloomberg News.