The wizard of Omaha, philanthropist and a classicrepresentation of the word ‘investor’ does not need much introduction. WarrenBuffet who is the Chief Executive Officer of Berkshire Hathaway has numerousaccomplishments under his portfolio.
He is worth more than 87 Billion accordingto estimates by Bloomberg and Forbes. Warren Buffet currently owns around 37%of the company shares. He pledged that 99% of his wealth will go charity oncehe expires. He has been a visionary in seizing businesses which are undervaluedand turning them into gold mines. Though criticized for his lack of initiativestowards investing in tech firms, his vast knowledge in other fields such asrailways, insurance to name a few, and continuous perseverance made him the manhe is today. Partnerships were his initial way of raising funds. He used themoney to buy undervalued stocks and later sold them at a premium.
Similarly, hebought the stock of Berkshire Hathaway a textile industry at that time. Hegradually regained control of the company and made it a conglomerate which hasinvestments in diverse businesses. The primary objective of Berkshire Hathaway is toinvest in companies which paid good dividends, such as Coca-Cola, IBM, andAmerican Express.
The company is registered on the NYSE; it trades in bothclass A and Class B shares. The class A stocks increased almost 4410% (Currentvalue is 320,238 USD) since its listing. On a contradictory note to theirinvestment strategies, Berkshire Hathaway does not pay dividends to theirshareholders.
The class ‘A’ share value is too high for any investor to buy.Berkshire Hathaway says that a high share value displays the confidence the companyhas in it.The Board of Directors at Hathaway is ageing and indire need of new leaders who can replace the existing ones. The wizard of Omahais 87 years old. The vice chairman of Berkshire Hathaway, Charlie Munger isalso 92 years old. Mr. Buffet cannot run the company endlessly and the board ofdirectors of Berkshire has retirement plans in order as well.
Berkshire Hathawayhas always considered of planning a successor after Warren Buffet but as longas Mr. Buffet stays healthy and is willing to work, he is the boss. The thought of Buffet not being the CEO of BerkshireHathaway is disheartening. The charming man has his own way of doing businessand that too successful business. Investors put their money in some stocks justbecause Buffet said that the industry has a better growth in the future. Mr.
Buffet is a Public figure and his powerful influence is spread all over theworld. Buffet made his intentions clear regarding selectinghis successor. Mr. Buffet is a huge admirer of the values such as integrity, smartand passionate. He wants someone who has the core values of the BerkshireHathaway imbibed in him and whose personal goals lie according to the vision ofthe company. This clearly shows that the next CEO of Berkshire will be someonewho spent his majority of time creating and adding value to the organization.
In the 2015 annual letter of Berkshire Hathaway, Mr. Buffet mentioned that theynow have the exact person to succeed him as CEO. Some of the choices that theyhave are Ajit Jain, executive VP of Berkshire Hathaway’s National IndemnityCompany insurance subsidiary and Greg Abel, CEO of Berkshire Hathaway EnergyCompany, and vice chairman of non-insurance operations of Berkshire Hathaway. Thesetwo have been promoted recently to the company board as executives and are inprime position to land as the next CEO of Berkshire Hathaway. A deep dive into the profiles tells us how theyfunction and what they can bring to the table once they succeed the oracle ofOmaha.
Ajit Jain who is aged 65 and is from an Indiandescent heads Berkshire Hathaway’s Insurance business. People define him as arisk taker and a box of innovative ideas. He is the prime protagonist in devisingsome of the insurance policies which generated tons of income with premiums onthe insurance. Buffet wrote in one of the annual letters that “Ajit Jainhas created Billions of value for his Berkshire Shareholders and if there wereever to be another Ajit and you could swap me for him, don’t hesitate. Make thetrade!”On the contrary, Gregory Abel aged 55 who hail fromCanada, looks after the energy business.
As with the most of the employees ofBerkshire Hathaway, he also avoids the limelight of media and social presence.He shares the quality of integrity as is with Buffet. Buffet told to an alummagazine that “Abel brings in innovative ideas and is always creative inhis business approach”. Charlie Munger the Vice-chairman also speaks highlyof these two people. He says that in taking some business decisions each is abetter business executive than Buffet.
This shows that both are competent enough to be thesuccessor of the Oracle of Omaha. But industry stalwarts suggest that BerkshireHathaway can go for someone who is younger, in this case, evidently GregoryAbel. Analyzing the after-effects of Buffet stepping downis a difficult one. Company shareholders might lose confidence in BerkshireHathaway and sell the shares of the company in the short run, once buffet stepsdown.
The chosen one must show his appetite for creating lucrative businesses andattractive propositions so that he gains the confidence of the shareholders.However, Buffet assures his shareholders that he ishealthy and enjoys going to the office every morning and there is no otherplace in the world he would rather be, than in his office.