Berkshire Hathaway’s future is ‘quite rosy’ even without Warren Buffett
As Warren Buffett is set to take the stage once more at Berkshire Hathaway’s (BRK-A, BRK-B) annual shareholders meeting, it’s only natural that questions around his succession resurface and what that might mean for the future of the company.
In conversations with shareholders and Buffett watchers, many believe that the 88-year-old investing legend has built a company and culture that will last long after he is gone.
For starters, he’s developed a deep bench of talent when it comes to Berkshire Hathaway’s leadership. In early 2018, Buffett put Ajit Jain in charge of all Berkshire Hathaway’s insurance activities and Greg Abel in charge of all other operations.
“These moves were overdue,” Buffett wrote in the annual letter. “Berkshire is now far better managed than when I alone was supervising operations. Ajit and Greg have rare talents, and Berkshire blood flows through their veins.”
On the investing side, Buffett’s two young lieutenants, Todd Combs and Ted Weschler, each manage $13 billion of Berkshire’s massive $173 billion stock portfolio and have “total discretion” over investment decisions.
Lawrence Cunningham, the author of “Berkshire Beyond Buffett,” is confident about the future of the investing and insurance conglomerate because of the talent at Berkshire and its subsidiary companies.
“It’s an amazingly talented group of people. Everyone thinks Warren’s a one-man show at Berkshire, but that book demonstrates that there are hundreds of supremely talented people that he’s trained and groomed and brought along,” Cunningham told Andy Serwer during a panel at Yahoo Finance’s U.S.-China Forum on Friday.
Cunningham added that when he speaks to Abel, he often thinks that’s talking to Buffett himself.
An investment from Buffett is a vote of confidence, especially during times of financial stress when companies require a lifeline. While the capital may be critical, there’s a significant endorsement that comes with the name Buffett.
“That’s obviously the one big thing that you lose, right, when Charlie and Warren aren’t around is that kind of market clout,” UBS analyst Brian Meredith said during the forum.
However, Meredith predicted that Buffett is training the young investment deputies to fill that role.
“They’re developing all these connections and Warren is super smart, and he knows how to mentor people, and that’s what he’s doing right now to put them in that position when you have a situation, like a financial crisis or whatever, they know, or an investment banker on Wall Street knows, ‘Ah, I can call Todd, or I’ll call Ted, or I can call Ajit,’ right? Boom, first call.”
Another key Buffett attribute is the ability to put together a deal quickly.
“Also, I’m sure he’s training them to actually have that ability to turn that transaction around in 24 hours,” Meredith said. “That’s another very unique thing about Warren Buffett and Berkshire Hathaway. I mean, when a banker runs in a situation, and he needs to figure out a deal or get capital in 24 hours, it’s not easy to do, right, Warren can do that very quickly.”
During the forum, value investor Tom Russo, managing member of Gardner Russo & Gardner, also referenced Buffett’s commitment to preserving the culture when Berkshire acquired a business. This approach to investing is likely to continue even without Buffett.
“Everybody knows you can sell a business to private equity, but the contract that private equity has with its investors is they want their money back over a fairly narrow, short period of time,” Russo said on a panel at the forum. “If someone wants to preserve the culture and the quality and the character of the business that they’ve worked their lives to build, there’s really only one place where they can sell that business.”
This approach, Russo explained, allows Buffett to buy better businesses at lower prices because “great businesses don’t want to sell to a private equity firm that will be quickly in charge of destroying what made it great.”
“With that feature intact, coupled with two new vice chairmen Greg and Ajit who are both excellent, the best in the world in these areas, plus these two investors Todd and Ted, how are brilliant, I think the future is quite rosy.”
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