What To Expect From Buffett's Annual Letter (BRK-B, UNH, COP, XOM, MCO, RSG)

This weekend we will get to see the annual letter to shareholders from Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A).  We expect a far more confident Buffett than what we witnessed last year when Buffett’s 2009 letter was just awful in comparison to today.  With the multi-billion mega-merger acquisition of BNSF as his “all-in bet on America” we expect Buffett to show long-term confidence here in his outlook with some caution and reservation in the near-term.

We recently addressed many of Berkshire’s key changes in his latest holdings to show which we think Mr. Buffett will keep adding to and which we think he will keep contracting.  Here are some quick takes from that:

• United Health Group (NYSE: UNH) is being steadily cut and we would expect Buffett to say the sector has continued political risks despite the notion that he is a supporter of the Administration’s efforts.
• We already knew of Buffett’s long slow exit in ConocoPhillips (NYSE: COP), but it was interesting to see Buffett cut Exxon Mobil Corp. (NYSE: XOM).  This was shocking considering that Buffett can get all the exposure he wants in oil.  We’d like to hear his take on energy ahead.
• Buffett has continued adding to Well Fargo & Co. (NYSE: WFC) while he has not added to others.  Buffett has said Wells Fargo is his favorite bank and we’d expect to see praise here.
• Moody’s (NYSE: MCO) has been a long and steady declining position, and he has hinted that the  model has changed there.  We expect a full exit of Moody’s as a stock holding in time.
• The most recent move is into garbage with investing buddy Bill Gates into Republic Services Inc. (NYSE: RSG).

Last year, Buffett and Charlie Munger noted, “We’re certain… that the economy will be in shambles throughout 2009… and.. probably well beyond… but that conclusion does not tell us whether the stock market will rise or fall.” There is obviously no way that Buffett will have that tone.  But he is still likely to call America as having its best days ahead…. On that notion, it is up to you if you want to believe him.

What is interesting is that this week Buffett had a roundtable in New York and CNBC has fielded questions from its media watchers all week.  Becky Quick will be doing roughly a three-hour segment on Monday morning with none other than Warren Buffett himself.

This is likely to be a very different shareholder letter than what we saw last year.  Buffett’s full list of his most recent holdings is here.

JON C. OGG