In a 45-minute video that Warren Buffett showed to thousands of Berkshire Hathaway shareholders this weekend, one investor recounted his worst nightmare: a headline that read “Buffett Kicks Bucket.”
Concern about how long the 92-year-old will stay BerkshiresThe rudder of has dogged its investors for years. But at this year’s annual meeting in Omaha, they got their best insight into the man Buffett considers the answer to the succession question: Greg Abel, the 60-year-old vice president of the company’s non-insurance business.
At the same event in 2022, media-shy Abel was able to walk around the convention floor largely unnoticed. But this year Abel – heir apparent to the leadership of the $710 billion conglomerate that includes the BNSF railroad, private jet operator NetJets and insurer Geico, as well as the other public and private groups in which Berkshire has invested over the years — he was surrounded by dozens of people hoping for a photo together. He took a moment with each, thanking them for attending.
“A few years ago I was quite frustrated that they didn’t put it on stage or on camera,” said Darren Pollock, portfolio manager at Cheviot, a Berkshire investor. “People are getting to know him much better. . . We need to see who the next generation will be when Warren is 92 and Charlie [Munger, Berkshire’s long-term business partner] it’s 99.”
How Abel is perceived is crucial, also because Berkshire’s reputation, hand in hand with Buffett’s, has won the investment power an initial look at the offers convinced potential targets that they would be better handled under Berkshire than rival bidders and, some analysts argued, allowed it to disclose less financial information about its divisions or engage less willingly with its shareholders than the typical publicly traded companies.
Abel appeared more confident than before in his responses to shareholder questions, even if he lacked Buffett’s popular appeal. He has been criticized for the performance of the BNSF, which suffered a derailment in March, and spoke knowingly of a separate crash after the railroad was found to have been encroaching on tribal land for nearly a decade. One investor said he was concerned Berkshire didn’t have systems in place to address what they called “reprehensible behavior” at BNSF.
Abel he said the criticism was valid, that the lessons had been learned, and that the lawsuit underlined that BNSF needed to deliver on its commitments. “There were some fundamental failures. . . We have had meaningful discussions with the tribe trying to resolve the issue, acknowledging that we obviously benefited from moving those trains,” she said.
The quick and blunt admission follows a pattern Buffett reminds Berkshire shareholders every year: his famous 1991 congressional testimony about a bond trading scandal at Salomon Brothers that nearly brought down the investment bank. “You lose money to the company and I’ll understand; lose an ounce of reputation for the company and I will be ruthless,” he said.
Abel also spoke about utility owner Berkshire Hathaway Energy’s planned $70 billion projects over the next decade as it transitions to renewable energy sources including wind and solar. “As we employ that capital, obviously we earn a return on equity,” he said. “But it will be a long journey.”
Pollock said Abel had presented himself as a no-nonsense operator. Seeing Abel talk about returns on capital projects was itself noteworthy, he added, given that Buffett has long said the Berkshire home office is responsible for capital allocation, not business operations.
Abel’s experience at the helm of BHE and his hands-on approach with Berkshire’s dozen firms could also mean he’ll be a more active manager than Buffett, perhaps targeting synergies or branch linkages, something Buffett has never sought to achieve. favor.
In a sign of the potential, BHE announced last year that it would be developing a manufacturing site powered by renewable energy, with Berkshire-owned metal components group Precision Castparts agreeing to be the first firm to occupy the space.
“There are tremendous opportunities for Berkshire companies to work together,” said Chris Rossbach, chief investment officer at fund manager J Stern & Co. “Warren Buffett talks about many benefits [for] companies to be part of Berkshire’s long-term business, but this value-add opportunity isn’t something they’ve talked about as much.”
Managers of some Berkshire businesses said Abel took a more hands-on approach. In March, Abel visited with Brooks Running CEO Jim Weber to look at the footwear business, while newly acquired toy company Jazwares reported its findings to Abel and his team on a monthly basis.
“Warren has grown with all the businesses,” Abel told CNBC last month. “I had to learn about companies and their industries which means there will be an active dialogue with managers. And that helps immediately.
Investors still crave more information about Abel or the executives who will surround him, including Todd Combs and Ted Weschler, who already manage a chunk of Berkshire’s $328 billion stock portfolio and are set to have a lot more oversight when Buffett leaves .
“It’s nearly impossible to start like Warren Buffett. It takes years and years and years of people to get to know you,” said Rhys Williams, chief strategist at Spouting Rock Asset Management. “No one replaces Warren Buffett, but they will be admirable stewards.”
Buffett set the stage for his eventual successor, providing a blueprint in more than 50 letters to shareholders over the decades and in his responses to Berkshire’s annual meetings.
“The picture has been set,” Abel said on Saturday, speaking on stage alongside Buffett, Munger and Ajit Jain, Berkshire’s vice president of insurance operations. “We know how . . . you and charlie got close and [I] I really don’t see the structure changing.
Buffett told shareholders that Abel had proven himself a capital allocator and that he had no alternative to lead the company.
“I don’t have a second choice,” Buffett said. He added, “If something happened to Greg, I’d tell the directors they have a problem.”
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