Warren Buffett Faces Pressure for More Disclosure: FT

Investment analysts are criticizing Warren Buffett over the quality of the financial disclosures of his company, Berkshire Hathaway, the Financial Times reported.

The FT interviewed five of the six analysts who cover the $370 billion company, which is the third largest on the U.S. stock market. They all noted difficulty in modeling the company's financial results based on its quarterly filings.

The FT said that Buffett rejected the criticism, telling the paper that Berkshire communicates “all the relevant factors for a long-term investment in the shares.”

Buffett told the FT that he prefers communicating with shareholders through his annual letters, the next of which is set to be published on Feb. 28, as well as through answering questions at the company's annual shareholder meeting in Omaha.

The FT interviewed five of Berkshire’s six analysts. One said Berkshire “could stand to reveal more," while others described the level of disclosure as "limited," “poor” and “terrible.”

Berkshire’s businesses span insurance, utilities, railways, manufacturing, retail, newspapers and many more industries. Eight of its subsidiaries would be Fortune 500 companies if they were split off. The BNSF railway and Berkshire Hathaway Energy publish quarterly earnings reports of their own but analysts say other divisions report substantially fewer details than rival companies.

“I am not begging for a 10 times increase in the size of the 10-Q [regulatory filing], but disclosure is somewhat limited,” said Cliff Gallant of Nomura. “For example, in General Re, one of the world’s largest reinsurers, what is growing and what is not? What is it exposed to and what is it not?”

Jim Shanahan of Edward Jones described disclosure at Berkshire as “terrible . . . It is laughable that you could model this company in the same way as you could any other financial company.”

Berkshire has never sought analyst coverage — its six analysts compare with more than 20 for General Electric, for example — and Buffett said that, since he began investing in shares at the age of 11, he had never once bought something on the basis of an analyst recommendation.

Buffett’s preferred method for communicating with shareholders is directly through his annual letters, the next of which is due to be published on February 28.

“I have just written 20,000 words in an attempt to make sure our million shareholders are as well informed as possible and have the information I would want if I were in their position,” he said.

Buffett and Berkshire’s vice-chairman, Charlie Munger, also take six hours of questions from shareholders, journalists and a panel of three analysts at Berkshire’s annual meeting in Omaha every May.

The aim is to ensure that every shareholder has the same level of information at the same time, Buffett said, rather than allowing analysts and large institutional investors additional access.

“As an insurance analyst, the level of investor engagement is more frequent and with greater depth at other companies I cover,” said Jay Gelb of Barclays, who has been on the analyst panel at the annual meeting in previous years.

“There is no earnings call, no investor relations department at Berkshire. The only time we get significant access to management is at the annual meeting and when Warren is on the business cable channels.”