In a 45-minute video that Warren Buffett showed thousands of Berkshire Hathaway shareholders this weekend, one investor recounted his worst nightmare: a headline reading “Buffett Kicks Bucket”.
Concern over how long the 92-year-old will be at Berkshire’s helm have stalked its investors for years. But at this year’s annual meeting in Omaha, they got their best view yet of the man whom Buffett regards as the answer to the succession question : Greg Abel, the 60-year-old vice-chair of the company’s businesses outside insurance.
At the same event in 2022, the media-shy Abel was able to walk around the convention floor largely unnoticed. But this year Abel — heir apparent to lead the $710bn conglomerate that includes the BNSF railroad, private jet operator NetJets and insurer Geico, as well as the other public and private groups Berkshire has invested in over the years — was surrounded by dozens of people hoping for a picture together. He took a moment with each, thanking them for attending.
“A few years ago I was quite frustrated that they weren’t putting him up on stage or in front of the camera,” said Darren Pollock, a portfolio manager at Cheviot, a Berkshire investor. better . . . We need to see who the next generation is when Warren is 92 and Charlie [Munger, Berkshire’s long-term business partner] is 99.”
How Abel is perceived is critical, not least because Berkshire’s reputation — hand-in-hand with Buffett’s — has gotten the investment powerhouse a first look at deals, convinced potential targets that they would be better managed under Berkshire than rival bidders and, some analysts have argued, allowed it to disclose less financial information about its divisions or engage less willingly with its shareholders than typical publicly traded companies.
Abel appeared more confident than previously in his answers to shareholder questions, even if he lacked Buffett’s folksy charm. He was grilled on the performance of BNSF, which suffered a derailment in March, and spoke knowledgeably on a separate incident after the railroad was found to have trespassed on tribal land for nearly a decade. One investor said they were concerned Berkshire did not have systems in place to address what they called “reprehensible behavior” at BNSF.
Abel said the criticism was valid, that lessons were learned and that the lawsuit underscored that BNSF had to live by its commitments. Obviously benefited from moving those trains,” he said.
The quick and forthright admission follows a model that Buffett reminds Berkshire shareholders of each year: his famous 1991 congressional testimony over a bond trading scandal at Salomon Brothers that nearly brought down the investment bank. “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm and I will be ruthless,” he said.
Abel also spoke about utilities owner Berkshire Hathaway Energy’s planned $70bn of projects in the next decade as it shifts to renewable power sources including wind and solar. “As we deploy that capital, we obviously 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 through 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 dozens of businesses may also mean he will be a more active manager than Buffett — perhaps aiming for synergies or tie-ups among subsidiaries, something Buffett has never sought to foster.
In a sign of the potential, last year BHE announced it would develop a manufacturing site powered by renewable energy, with Berkshire-owned metal components group Precision Castparts agreeing to be the first business to take up space.
“There are tremendous opportunities for Berkshire’s businesses to work together,” said Chris Rossbach, chief investment officer at fund manager J Stern & Co. “Warren Buffett speaks about many benefits [for] companies to be a part of Berkshire’s long-term business, but this opportunity for added value is not something he has talked about as much.”
Managers of some Berkshire businesses said that Abel has been taking a more hands-on approach. In March, Abel visited Brooks Running chief executive Jim Weber to see the footwear business, while newly acquired toy company Jazwares has been reporting its results monthly to Abel and his team.
“Warren grew up with all the businesses,” Abel told CNBC last month. “I had to learn the businesses and their industries, which means there’s going to be an active dialogue with the managers.
Investors still crave more insight into Abel or the executives who will surround him, including Todd Combs and Ted Weschler, who already manage a portion of Berkshire’s $328bn stock portfolio and are tipped to have far more oversight when Buffett departs.
“It’s almost impossible to start off as Warren Buffett: that takes years and years and years of people getting to know you,” said Rhys Williams, chief strategist at Spouting Rock Asset Management. .”
Buffett has been setting the stage for his eventual successor, providing a blueprint in more than 50 letters to shareholders over the decades and in his answers at Berkshire’s annual meetings.
“The framework has been laid out,” Abel said on Saturday, speaking on stage alongside Buffett, Munger and Ajit Jain, Berkshire’s vice-chair of insurance operations. [I] really don’t see that framework change.”
Buffett told shareholders that Abel had proved himself as a capital allocator and that he had no alternative to head the company.
“I don’t have a second choice,” Buffett said. He added: “If something happened to Greg, I would tell the directors they have a problem.”