As Berkshire Hathaway (BRK.A, BRK.B) gets bigger, investors increasingly need to rely on Warren Buffett's reputation rather than data, says KBW's Meyer Shields. "It's a critical issue ... You don't really know what you're getting with Berkshire Hathaway." It's no big deal right now, says Jeff Matthews, but "once [Buffet's] gone, people are going to say, 'What's here? What do I really own?'"
Take Lubrizol, for instance, writes Noah Buhayar. Until being purchased by Berkshire in 2011, the company filed long, detailed annual reports with regulators. Now its results are lumped in with several other Berkshire manufacturing businesses.
Regulators have noticed and have successfully pushed Buffett for more disclosure as it relates to insurance operations. “The fact that they wouldn’t on their own reflects an attitude of very, very limited disclosure,” says Shields.
There are no bright lines as to what constitutes material information, says a top securities lawyer. Instead there are rules of thumb, such as whether a unit contributes more than 10% of total revenue. Going back to Lubrizol, its 2012 revenues were $6.1B, well below the $16B that would make up 10% of Berkshire's top line.