The only analyst who doesn’t like Buffett’s Berkshire

May 5, 2012, 6:32 PM UTC

Warren Buffett

Omaha, Neb. (FORTUNE) — This weekend, at Berkshire Hathaway’s annual meeting, tens of thousands of Warren Buffett faithful have descended on Omaha, the hometown of Buffett and his company. Before sunrise, investors lined up to get good seats in the Centurylink Center, which is filled with Berkshire shareholders.

Like in past years, Buffett will hold an all-day meeting in the arena, where he and his long-time partner Charlie Munger will answer questions from shareholders and journalists. For the first time, Buffett will also welcome all of the analysts at brokerage firms who follow the company to ask questions as well, except one, Meyer Shields. The analyst of St. Louis-based Stifel Nicolaus is the only analyst at a Wall Street brokerage firm that doesn’t recommend Berkshire’s stock. The analyst currently rates Berkshire’s stock a “hold.” And that’s an upgrade. A little over a year ago, he had the company at “sell.” What’s more, Shields is the only analyst that has been right. Berkshire’s stock has underperformed the market in the past year.

MORE: Berkshire Faithful Flock to Omaha

When questioned about Shield’s exclusion since selecting the analysts back in December, Buffett has said that there wasn’t room for everyone. He says another analyst at Morningstar, which is a primarily a mutual fund rating firm, also wanted to be part of the question and answer session, but was also denied.

Shields’ argument against buying Berkshire’s stock has to do with the company’s reserves. Every insurance company, including Berkshire, has to put away money for future payouts. If the insurance policies expire without a payout, or if it looks like they will expire without a payout, the company can take money out of that reserve account. When money comes out, it adds to the company’s profits. Shields says a larger than average percentage of Berkshire’s profits recently have been coming from reserve account releases.

For instance, last year, Berkshire’s reserve release of $2.2 billion was nine times the $248 million the company made in underwriting profits. “We generally view reserve development as lower-quality earnings at considerable risk of slowing, stopping or reversing,” wrote Shields in a report in February.

Buffett bulls, however, say looking at Berkshire as an insurance company misses the point. The true value of the company has always been in Buffett’s ability to invest the money he brings in from the insurance business. Plus, given all of Buffett’s acquisitions over the past decade or so, including railroad Burlington Northern, the company is more of a conglomerate than an insurance company. So the company should really be valued like a portfolio of businesses. Add up the parts and Berkshire’s shares look cheap, particularly given that many of the business will benefit from a better U.S. economy, which looks to be improving despite recent hiccups in the job market.

Shields retorts that if you want to invest in the U.S. economy, buy the S&P 500. Unlike Berkshire, there’s no succession risk. Buffett, 81, who recently revealed he had early stage prostate cancer, says he will split his job in at least two when he retires. No matter how well Buffett does at picking successors, there is likely to be some friction, after Buffett. “Given Berkshire’s significant company-specific risks, we view broader indexes as a safer economic-recovery investment than Berkshire,” wrote Shields.