Category Archives: Buffett Successors

Ajit Jain Not Only Helps Run Berkshire, He Owns Berkshire

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Newly appointed Berkshire Hathaway vice chairman Ajit Jain not only oversees all of Berkshire’s insurance operations, he has a significant stake in the conglomerate.

Berkshire’s regulatory filing this past Thursday revealed that Jain has roughly $109 million in Berkshire stock.

Jain owns $21.7 million of Berkshire stock, and also indirectly owns $87.5 million of Berkshire stock held by his wife, a family non-profit foundation and two family trusts.

The filing makes clear that Jain needs to not only stay in Warren Buffett’s good graces, he definitely need to be good to his wife.

2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Major Changes Coming With Abel’s and Jain’s New Roles as Vice Chairmen

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With Gregory Abel elevated to Berkshire Hathaway’s Vice Chairman – Non-Insurance Business Operations, and Ajit Jain appointed Vice Chairman – Insurance Operations, Warren Buffett has made clear that major changes are in store in the command structure of Berkshire’s operations.

While Buffett has no interest in stepping down as chairman, he is shifting the responsibility for both the bolt-on acquisitions and the setting of salaries and compensation for Berkshire’s managers to his new vice chairmen.

“They’ll decide the compensation of the people underneath,” Buffett explained in a January 10 interview on CNBC. “I mean, certain people we have compensation arrangements with that we will have in force for their lifetime because we made up at the time of acquisition, but aside from the ones that are fixed, those decisions will be theirs. And smaller bolt on acquisitions will probably be theirs if there’s a large bolt on acquisition, then Charlie and I will get involved.”

Berkshire shareholders apparently should have no fear that Buffett’s famed “elephant gun,” the term he uses for hunting for giant-sized acquisitions, will be silenced any time soon.

2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Only One CEO in Berkshire’s Future Says Warren Buffett

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With both Greg Abel and Ajit Jain recently promoted to the positions of vice chairman, the obvious question is will they one day be co-CEOs of Berkshire.

“No” say’s Warren Buffett, who in a January 10 interview on CNBC made it clear that there will only be one CEO.

“When I’m not CEO, there will be another CEO, Buffett explained. “There will be a CEO. And how that CEO will organize things will be up to him in this case. And he will figure out the best way to do it. And it won’t change very much. It will change a little, but it won’t change very much.”

So, will the CEO be Abel or Jain? From Buffett’s remarks it seems clear it will be Abel.

“There’s no horse race at all in these two fellows,” Buffett noted in answer to a question of whether the two are jockeying for position. “They know each other well. They like each other well. They both have their areas of specialty. I mean, Greg would not want to be running insurance and Ajit would not be running the other operations.They are extremely good at what they do. Those are two pretty different businesses. And they’re roughly equal businesses. There are more people on one side, but the insurance business generates over $100 billion of float in addition to having well over $100 billion invested in it in terms of net worth. So, there’s more or less parity of earning power and importance.”

Since according to Buffett “Ajit would not be running the other operations,” and Buffett has expanded Abel’s purview to all of Berkshire’s non-insurance businesses (a new CEO has been appointed to head Berkshire Hathaway Energy), everything points to Abel, 55, being the heir apparent for CEO.

As for other potential CEOs, Mathew Rose, executive chairman of BNSF Railway, no longer seems to be a candidate to take over the helm of Berkshire. Nor does Mark Donegan, CEO of Precision Castparts. The two executives lead two of Berkshire’s largest companies.

Buffett also revealed that Charlie Munger, who already had the title of vice chairman, would not be getting a new title, and was completely on board with sharing the title.

“It was his idea, actually, in terms of the title,” Buffett said. “I got about halfway through the first sentence, which is more than i usually get through with Charlie before he comes up with a better idea, and he just says, let’s just have three vice chairmen.”

2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Are Ajit Jain and Greg Abel the Successors to Warren Buffett and Charlie Munger?

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Despite Warren Buffett being a spry age 84, and Charlie Munger a youthful 91, the question of the successor or successors that will lead Berkshire Hathaway continues to be on analysts’ and commentators’ minds.

“Both the board and I believe we now have the right person to succeed me as CEO — a successor ready to assume the job the day after I die or step down,” Buffett has said.

Now, in his letter published in the 2014 Annual Report, Charlie Munger seems to hint that Ajit Jain or Greg Abel could be in line to provide the leadership that will carry Berkshire forward.

“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.

And I believe neither Jain nor Abel would (1) leave Berkshire, no matter what someone else offered or (2) desire much change in the Berkshire system.”

While neither Buffett nor Munger has officially revealed the next leader or leaders of Berkshire Hathaway, both Jain and Abel would seem to fit the bill.

First, they would be promoted from inside the company, and thus are steeped in Berkshire’s unique corporate culture.

Secondly, they are both young enough to have long reigns at a company that certainly has no interest in a mandatory retirement age, and each of them would bring essential skill sets to the job.

Both have played important leadership roles heading two of Berkshire’s largest units.

Ajit Jain, as the man who has built Berkshire’s insurance and reinsurance empire, is better equipped than almost anyone in the world to take on the important task of making sure Berkshire’s insurance companies don’t try to grow by taking on undue risk.

Greg Abel, as the head of Berkshire Hathaway Energy, certainly knows about capital allocation. Under his leadership, BHE has grown into one of the world’s largest energy providers and a leader in renewable energy generation. He also sits on the Board of Heinz, and BHE includes Berkshire Hathaway Home Services, Berkshire’s rapidly expanding real estate sales unit. Both of these companies give him additional insight into consumer markets.

As for their ages, Jain is age 63, and Abel is only 52, so they hopefully would have many years to put their stamps on Berkshire.

So which one is it?

Why not both of them?

Well, while Buffett spoke in the singular, he has already stated that his replacement would probably see his various roles filled by several people.

The job of managing Berkshire’s $125 billion and growing stock portfolio will almost certainly fall to Ted Weschler and Todd Combs, who Buffett has been grooming by giving each a multi-billion dollar stock portfolio to manage.

Together, Jain and Abel would also be sounding boards and counter balances for each other in much the same way that Buffett has used Munger.

While Warren Buffett rightly gets the lion’s share of credit for Berkshire’s phenomenal growth, Charlie Munger’s sage advice has often been overlooked by the press.

It certainly hasn’t been overlooked by Buffett.

While the latest buzz comes from Munger, Buffett has repeatedly praised both Jain and Abel.

On Jain, Buffett said “It is impossible to overstate how valuable Ajit [Jain] is to Berkshire. Don’t worry about my health; worry about his.”

On Abel, Buffett has highlighted the impact that he and Mathew Rose (CEO of BNSF) have had on Berkshire, stating “I am also both proud and grateful for what they have accomplished for Berkshire shareholders.”

So, if Ajit Jain and Greg Abel are indeed the future leaders of Berkshire, shareholders can look forward to continued smart and capable leadership.

And we shouldn’t forget BNSF’s executive chairman Mathew Rose, who is only in his mid-fifties. He is certainly a prime contender as well.

© 2015 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

Buffett Successors: Are Ted Weschler and Todd Combs in the Running?

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Handicapping the successors to Warren Buffett and Charlie Munger has become a major pastime for Berkshire Hathaway followers, so here is a pro and con analysis for two possible candidates, who because of their similar work as Berkshire investment portfolio managers, will be treated as one.

Candidates: Ted Weschler and Todd Combs

Current positions: Manage more than $14 billion in investment portfolios for Berkshire Hathaway.

Pro: With a total portfolio of over $100 billion in stock of leading companies, including Coca Cola, IBM, Wells Fargo, and American Express, Berkshire Hathaway in part resembles a mutual fund. Management of this portfolio has traditionally been Buffett’s job, although he has delegated over 10% of the portfolio to Weschler and Combs, and has steadily increased the amount they manage each year. Weschler and Combs each manage a portfolio of their own choosing. The case for either or both of them is that asset allocation is the primary role that both Buffett and Munger have chosen for themselves, and portfolio management is just that.

Both Weschler and Combs are former hedge fund managers. Ted Weschler was the founder of a hedge fund, Peninsula Capital, and Todd Combs was the CEO and Director of Castle Point Capital.

Berkshire’s company acquisition strategy, which last year included acquiring global food company Heinz, and this year will gain them the Van Tuyl Auto Group, and a portion of Burger King, puts Berkshire in the same class as a hedge fund, only with a long-term ownership time frame.

Alice Schroeder, Bloomberg View columnist and author of “The Snowball: Warren Buffett and the Business of Life,” noted about Ted Weschler that “Warren keeps describing him as an investment manager, but the reality is his skills are more comparable to those of Warren himself. He has a background in broad capital management, including private equity, mergers and acquisitions, owning businesses and being directly involved in their management.”

As Warren Buffett’s handpicked protégés, Buffett has praised their success, noting that “They have made Berkshire billions already that we wouldn’t have otherwise made,” Buffett said on CNBC. “They both have a fundamental combination of soundness and brilliance.”

Con: Lack of management experience leading a company the size of Berkshire Hathaway. There are other Berkshire managers, including Geico’s Tony Nicely, BNSF Railway’s Matt Rose, and Berkshire Hathaway Energy’s Greg Abel, that have more experience helming large corporations.

Biggest Negative: Buffett has already ruled them out, explaining on CNBC that “They will not be the Chief Executive Officer, but they will be there to help the Chief Executive Officer in that arena. Just like people that run given business are there to help in their areas.”

Analysis: This one is an easy one. When Buffett says you are out of the running, you’re out.

© 2014 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results