It’s one of the most asked questions in the business and investment world: Who will succeed Warren Buffett – arguably the most successful investor of all time – as CEO of Berkshire Hathaway?
This weekend, finally, the question has finally found an answer.
Greg Abel, currently vice president of Berkshire, is the anointed.
For many years now, the 90-year-old Mr. Buffett has made his millions of followers wonder who would put himself in his shoes.
He often gave the impression of enjoying the suspense.
In 1998, for example, Mr. Buffett was at a gathering of friends in Arizona where he was reported to have held an envelope and told those gathered that it contained details of his succession plan.
As the room fell silent, the mogul opened the envelope, before pausing to read its contents: “Check my pulse again.”
The fact that there is an ongoing succession plan, however, has never been denied.
A handwritten letter from Mr. Buffett, to be sent to shareholders the day after his death, has remained in an envelope in his secretary’s office for more than two decades.
They say to start: “Yesterday I died.
“This is definitely bad news for me, but it’s not bad news for our businesses.”
The Wall Street Journal reported at the time that his successor was likely one of the company’s three executives: Ajit Jain, Tony Nicely and Richard Santulli.
Mr Nicely has since taken a backseat at Geico, Berkshire’s insurance business, while Mr Santulli, who sold the NetJets business jet company to Berkshire, left in 2009.
Another competitor, David Sokol, was seen as a hot favorite, but quit a decade ago after questions about his stock trading arose.
That left Mr. Jain, managing director of Berkshire’s insurance business, and Mr. Abel, a 59-year-old Canadian, who currently runs all of Berkshire’s non-insurance business.
Now the company has answered the question – but only by accident.
The Berkshire Annual Reunion, an event that normally draws 40,000 or more visitors to Mr. Buffett’s hometown of Omaha, Nebraska but held online this year due to COVID restrictions, took place over the weekend. end.
During a question and answer session, Mr Buffett’s right-hand man Charlie Munger, 97, was discussing corporate culture in Berkshire when he blurted out, “Greg will keep the culture.”
Frenzied media speculation ensued until on Monday CNBC presenter Becky Quick, who knows Mr. Buffett well, announced that Mr. Abel was indeed the alleged heir.
She quoted Mr. Buffett as saying, “The directors agree that if anything happened to me tonight, it would be Greg who would take over tomorrow morning.
“If, God forbid, anything happened to Greg tonight, then it would be Ajit.”
“They are both great guys.
“The likelihood of someone having a 20-year-old track makes a real difference, however.
Berkshire’s approach to board succession is, to say the least, unorthodox.
Most companies are very clear about their succession planning.
Berkshire has been keeping its investors on their toes for many years now.
That said, as one of America’s most iconic business leaders of all time, Mr. Buffett has arguably won the right to defy convention.
Beginning his business career as an investment seller, the “Oracle of Omaha” established his own investment firm in 1956, from where in 1962 he began buying shares in a struggling textile manufacturer called Berkshire Hathaway.
He took control of the company three years later and began to transform it into his investment vehicle.
It continued to offer a compound annual return of 20% until the end of 2020 – achieving double the return that an investment in the S & P500, reinvesting dividends, would have provided during that time.
Someone who backed Mr. Buffett in 1965 with $ 1,000 would have seen the value of that investment skyrocket to $ 20 million in early 2020.
Berkshire itself is the seventh largest company by market capitalization in the S&P 500 Index – behind only Apple, Microsoft, Amazon, Alphabet, Facebook and Tesla – and is valued at $ 641 billion.
It wholly owns some businesses, such as Geico, clothing maker Fruit of the Loom, and fast food chain Dairy Queen.
Its Berkshire Hathaway Energy business is one of the largest utilities in the United States and, in the United Kingdom, the grid operator Northern Powergrid.
Berkshire also owns Burlington Northern Santa Fe (BNSF), one of America’s largest rail operators, which runs 32,500 miles of railroad tracks across the country.
Its holdings in a number of listed companies include a 5.4% stake in Apple valued at $ 120 billion, a 12% stake in Bank of America worth $ 42 billion, a 19% stake in American Express worth $ 23 billion, a 9.3% stake in Coca-Cola worth $ 22 billion and a 26% stake in Kraft Heinz worth $ 14 billion.
It also has holdings worth $ 5 billion each in US Bancorp, Moody’s, Chevron and Verizon.
Over the past decade, however, Berkshire’s performance has underperformed the S&P 500.
Berkshire has amassed a cash stack of around $ 145 billion and has struggled to use it – in part because company valuations have reached levels where Mr Buffett is reluctant to initiate buybacks.
It hasn’t launched a major acquisition in the past five years and some investors are frustrated that the company has missed, in part, the great rally in US equities over the past year with so much cash on the sidelines.
Cole Smead, portfolio manager at investment firm Smead Capital, said some investors have fallen a little in love with Mr Buffett over the past decade.
He told Sky News: “Buffett and Munger weren’t aggressive.
“Really coming back to 8 and 9, they didn’t show their historic aggressiveness in the chords back then.
“Now they’re frustrated because private equity pays ungodly sums, so private markets, they’re trapped in that.
“And then the public large-cap US equity markets in general, using the S&P as a benchmark, doesn’t look appealing to him – so they’ve kind of been trapped in that too.
“Last spring, they had opportunities, but again, there wasn’t a lot of aggression on his part. “
Mr Smead said Berkshire’s portfolio was “really set up for the next bear market in the US” with all of their cash.
“It was a very frustrating place for Buffett because it’s not the 1960s where nobody pays attention to stocks and nobody has any information, there are just less fish in the barrel so they can fish. because there are just too many. competition.”
If Mr. Abel – a former accountant who was described by Mr. Buffett in a 2013 video post as “a first class human being” and “a smart guy who will never do anything stupid” – will he the possibility of responding to any of these problems? any shortcomings anytime soon is debatable.
Mr Buffett, the sixth richest person in the world – who has pledged 99% of his $ 96 billion fortune – is clearly in no rush to retire.