Now leading the Buffett successor sweepstakes
The annual meeting of Warren Buffett's Berkshire Hathaway (BRK.A) last weekend was a celebration of capitalism with a healthy serving of the billionaire's humor. Still, fans of the 84-year-old Oracle of Omaha are increasingly contemplating what life may be like without the man many consider as one of history's greatest investors.
Buffett is well aware of the concerns about succession planning at the company he acquired in 1962 when it was a textile manufacturer. Over the years he has added a variety of other businesses, including Dairy Queen, Benjamin Moore Paints, Burlington Northern Santa Fe Railroad and most recently Duracell.
Buffett has hired Todd Combs and Ted Weschler as investment managers in recent years. However, the question of who will be Berkshire's next chief executive remains unanswered. Hints emerged over the weekend that Ajit Jain, who runs Berkshire's reinsurance business, and Greg Abel, head of Berkshire's energy businesses were the front-runners for the job.
Indeed, Berkshire's long-time Vice Chairman Charlie Munger described them as "proven performers who would probably be under-described as 'world class. ... In some important ways, each is a better executive than Buffett." In his letter, Buffett himself was more circumspect, saying "the board and I believe we now have the right person to succeed me as CEO" without offering any specifics.
Buffett watchers are starting to handicap his next move.
"At 63, Ajit Jain is no spring chicken in a world where people often retire at that age," wrote James Berman, a money manager who teaches a course on Warren Buffett-style investing at the NYU School of Professional Studies, in an email to CBS Moneywatch. "Clearly to Buffett and Munger, however, Mr. Jain is a virtual toddler -- a brilliant toddler at that -- and Greg Abel, at 52, is still in diapers. As Buffett says, the top job is all about capital allocation, so you could easily see either man at the job."
Shares of Berkshire Hathaway, which have surged more than 3,000 percent since 1990, fell less than 1 percent to $220,365 in trading on Monday. Partly fueling the stock's remarkable performance is the respect investors have for Buffett. Some analysts, though, expect the stock to take a temporary fall whenever Buffett exists the stage.
"It is my belief that the leadership of this company is going to look different post-Buffett," said Jim Shanahan, an analyst with Edward Jones, who has a "hold" rating on the stock, adding that he believes it will continue to prosper over the long run.
Longtime Berkshire shareholders, such as Thomas Russo of the hedge fund Gardner Russo & Gardner, say they aren't losing much sleep over the question of Buffett's succession because the company has taken steps to insure that the legend's legacy will live on after he meets the great market technician in the sky.
"The autonomy that Berkshire offers sellers of great businesses will continue to drive its success going forward," said Russo, who helps manage $10 billion.
Berkshire shareholder Paul Lountzis echoed Russo's sentiment. He told CBS Moneywatch that either Jain or Abel "would be a great choice."
Jain "loves insurance and is a little more private than Greg is," he said, adding that no one is anxious to see Buffett leave. "He should go on his terms. ... The bigger risk is him getting sick rather than him passing."
Another potential successor, BNSF head Matthew Rose, saw his star diminish after Buffett singled out the railroad in his letter, noting that it had "disappointed many of its customers." With a market capitalization nearing $370 billion, Berkshire Hathaway is large enough to accommodate both Jain and Abel. Buffett has recommended that his son Howard become nonexecutive chairman.
Even so, shareholders are hoping that their beloved Oracle will continue doing what he does so well for the foreseeable future.