KBW: Berkshire Hathaway Disclosure Isn’t “Keeping Up With Its $300 Billion Market Cap”

Berkshire Hathaway’s (BRK.B) Warren Buffett reputation as both a stock picker and an above-board manager of money has made him nearly a god, to the point where he is often above reproach.

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That hasn’t stopped KBW’s Meyer Shields and team from raising some pointed criticisms in a report released yestedardy. They explain their dissatisfaction with Berkshire Hathaway:

Another year, another missing invitation to Omaha. While we can't know for sure, we presume our exclusion from the panel from which Warren Buffett and Charlie Munger select analysts to ask questions at Berkshire Hathaway's annual meeting has something to do with our occasionally critical analysis. We have some operational questions, of course, but more important, we caution investors to consider whether this apparent message control limits their understanding of a company whose disclosure isn't, in our opinion, keeping up with its $300 billion market cap size. This is especially important in light of succession concerns that surround the stock.

What kind of issues does Shields and team see? One example: They find Berkshire’s choice of State Farm as a comparison misleading:

For the past several years, Berkshire has contrasted its own cost-free float provided by profitable underwriting against the industry's (unimpressive) tendency to lose money on underwriting while generating net returns from investment income. So far, so good. Less edifying, though, is the repeated contrast of Berkshire's track record of profitability to State Farm's…even though, as a mutual company, State Farm's profitability goals are inherently different from for-profit insurers like Berkshire. It's true that through year-end 2013, Berkshire's underwriters have "now operated at an underwriting profit for eleven consecutive years," but so have ACE (ACE), American Financial (AFG),  AmTrust Financial (AFSI), Arch Capital (ACGL), Chubb (CB), HCC (HCC), Progressive (PGR), RLI (RLI), and W.R. Berkley (WRB), any or all of whom provide a more meaningful comparison than contrasting Berkshire's results to a company that's not out to produce a profit in the first place.

Shares of Berkshire Hathaway have dropped 0.7% to $128.07 today at 3:15 p.m., while AmTrust Financial has gained 2.3% to $42.86, Progressive has fallen 0.9% to $24.75, Arch Capital has declined 0.9% to $57.05 and Ace has ticked up 0.1% to $102.08.