Warren Buffett first shared that Greg Abel would take over as CEO in 2021, but no one was quite prepared to hear him officially pass the baton last weekend at the Berkshire Hathaway (BRK.A 0.16%)(BRK.B 0.10%) annual meeting.
It's hard to imagine the company without the investing legend at its helm, but at 94 years old, Buffett is ready to hand over the reins. The board has approved Abel to take over as CEO by the end of the year.
Abel is Buffett's right-hand man
Abel has been a part of Berkshire Hathaway since it bought about 80% of MidAmerican Energy, where he was president, in 1999. Buffett first mentioned him by name in the 2002 annual shareholders' letter, calling him a "dealmaker" and a "manager" and saying he was a "huge asset for Berkshire Hathaway."
He continued to call Abel and his business partner Dave Sokol "brilliant managers of the business," and year after year, he said they were "terrific managers" and that "Berkshire couldn't have better partners. "
Image source: The Motley Fool.
In 2014, the 50th anniversary of Buffett's tenure at Berkshire Hathaway, vice chairman and Buffett's partner Charlie Munger gave his thoughts about the company. One of the tasks he gave himself was to "predict whether abnormally good results would continue at Berkshire if Buffett were soon to depart." His short answer was "Yes," for a number of reasons:
Under this Buffett-soon-leaves assumption, his successors would not be 'of only moderate ability.' For instance, Ajit Jain and Greg Abel are proven performers who would probably be under-described as 'world-class.' 'World-leading' would be the description I would choose. In some important ways, each is a better business executive than Buffett.
Both Abel and Jain were elected as directors and vice chairmen at Berkshire in 2018, with Jain responsible for the insurance business and Abel responsible for the non-insurance businesses, or everything else. In 2021, Buffett made the announcement that Abel was next in line, and by 2023, he said that Abel "in all respects, is ready to be CEO of Berkshire tomorrow."
Perhaps investors should have seen this move coming. In the 2024 annual shareholder letter, released in February, Buffett said: "At 94, it won't be long before Greg Abel replaces me as CEO and will be writing the annual letters."
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Key Data Points
What's coming next at Berkshire Hathaway?
With Abel as part of Berkshire Hathaway for more than 25 years, he's well acquainted with how things go at Berkshire and isn't likely to change them. It owns 189 businesses in addition to its equity portfolio, but those businesses run on their own. Berkshire Hathaway has a small central office, even though it's the seventh most valuable company in the world, with a market cap of nearly $1.2 trillion.
Back to Charlie Munger's prediction. He thought that:
Provided that most of the Berkshire system remains in place, the combined momentum and opportunity now present is so great that Berkshire would almost surely remain a better-than-normal company for a very long time even if (1) Buffett left tomorrow, (2) his successors were persons of only moderate ability, and (3) Berkshire never again purchased a large business.
For investors who are worried about how things will look with Buffett gone, he isn't going anywhere just yet, even when he leaves the top role. He said that he still plans to stick around at the company for the time being, so Berkshire Hathaway will still benefit from his "brand name" for now.
Buffett signaled strong confidence in Abel's abilities, saying that he doesn't plan to sell one share of Berkshire Hathaway stock, and that "the decision to keep every share is an economic decision because I think the prospects of Berkshire will be better under Greg's management than mine."
Berkshire Hathaway stock jumped after earnings, which were positive, implying investors don't see any fallout from Buffett stepping down. If all goes as planned, Berkshire Hathaway will continue to be a draw for investors, and there will certainly be great interest over the next few months as the market digests this news.
