When Warren Buffett Says You Can Die

Can your investment survive if the unthinkable happens to a key executive?

Jul 13, 2014 at 2:00PM

Graveyard By Mrtindc

Steve Jobs passed away within two years of announcing his diagnosis to the public. The CEO of JPMorgan has throat cancer. Berkshire investors are worried because Warren Buffett is, well... old.

When it comes to planning for the time after company leaders are gone, it's usually only the big names that get attention. However, succession is just as much a reality for companies with executives lacking household names.

Here's Buffett's take on the matter: when tragic news strikes, the next generation of leaders should be identified and ready to take over tomorrow.

Warren Buffett By Insidermonkey

Warren Buffett-insidermonkey.com

With that in mind, let's take a look at a company that probably doesn't get that much succession scrutiny, Huntington Bancshares (NASDAQ:HBAN). Let's see if it can pass the Oracle of Omaha's terminal test.

Getting to today
Huntington took a beating in the financial crisis. Not only was it saddled with a couple billion dollars in bad loans, but it also entered the period immediately following a round of aggressive acquisitions.

The result: a stock price that tumbled more than 95%, billions in goodwill and loan charge-offs, and a bit of C-level reshuffling. 

Since then, the company has undergone massive efforts to reorganize its balance sheet, return to responsible lending, and grow at a responsible rate.

This was largely the result of the cleanup man that Huntington brought on as CEO at the height of the financial crisis, Stephen Steinour.

Hban Ceo

Huntington CEO Stephen Steinour

Determined to turn the company around, Steinour, with over 25 years banking experience, set off on doing just about the opposite of what every other bank was doing at the time. 

These against-the-grain initiatives included expanding the bank's footprint, increasing personnel, and revamping its marketing efforts at a time when common sense would say reduce and regroup.

So far these plans have paid off. The bank has been able to attract new customers, increase the profitability of its loans, and launch a highly successful cross-selling strategy. 

Ready for tomorrow?
So what if (God forbid!) the worst were to happen to Huntington's top executive tomorrow?

The bank would be fine, and the reason is Huntington's culture.

Not only has Steinour instilled a culture of challenging the norm at Huntington by putting into play successful contrarian practices, but the Huntington Board of Directors has demonstrated long-term thinking by allowing him to do so in the worst financial climate since the Great Depression.

"Our board is very prepared to think longer term," confirms Steinour himself. However, if you are still skeptical, check out the real-life case study in succession planning currently taking place at the bank. 

Much of Huntington's recent turnaround, especially its massive cross-selling effort, has been very dependent on technology. The man who orchestrated the whole thing was then-CIO Zahid Afzal.

Computer Keyboard By Espensorvik

Flickr // espensorvik

Notice the past tense. That's because in spring of 2012, Afzal was in an unfortunate car accident that prevented him from returning to work. Rest assured that he is making an excellent recovery, but his injuries have since forced him to leave the company.

As Huntington continues to move forward, technology will only become a larger part of its overall business strategy. To see if it can survive a sudden change in leadership, keep an eye on how well its new CIO continues and expands successful use of technology at the company.

Is your investment ready for tomorrow?
Succession planning tends to only come up when unexpected events happen to a well-known executive. The truth is that unexpected events happen to executives of all sizes and statures.

If you are investing in a successful company, find out who the people behind that success are and if the company has adequately planned contingencies if those people were out of the picture tomorrow.

It's a morbid rule, but it's necessary to make sure that your investment doesn't bite the dust when a key employee does.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash-cow. While Buffett shakes in his billionaire-boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

David Post has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway, Huntington Bancshares, and JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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