Tag Archives: Buffett Successors

Buffett Throws Cold Water on Ajit Jain Rumors

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Two weeks ago rumors began flying that perhaps Warren Buffett had just signaled that Ajit Jain would be his successor as CEO of Berkshire Hathaway.

The rumors started when General Reinsurance Corp. Chairman and CEO Tad Montross announced that he would step down near the end of 2016.

Berkshire quickly announced that Ajit Jain, who already runs a large part of Berkshire’s reinsurance business, would add General Reinsurance to his portfolio.

Buffett watchers jumped on the news, speculating that the odds that Jain would someday take over Berkshire Hathaway had dramatically improved.

Not So Fast Says Buffett

Speaking at the 2016 Berkshire Hathaway annual meeting, Buffett threw cold water on the rumors. Buffett watchers, who hoped to divine the future of Berkshire’s leadership, got no help on their visit to the Oracle of Omaha.

Buffett noted that there are “no tea leaves to read in the fact that Ajit is supervising Gen Re from this time forward.”

While Buffett continues to emphasize that the conglomerate has a succession plan, and the Board is fully behind it, he is not going to reveal it to the public.

From his perspective, to do so would be to risk announcing a successor who might not take the job if a personal “situation” comes into play in the interim period. Buffett didn’t define that situation, but health is just one possible factor.

Speaking of health, Buffett, who at age 85 has no problem parrying five hours of questions at the annual meeting, also noted that the exact timing of succession is also an unknown. He doesn’t look to be interested in stepping down as he clearly loves what he is doing, and his recent $32.3 billion acquisition of aerospace manufacturer Precision Castparts shows he can still do it better than anyone else.

Buffett appeared to be in excellent health and spirits, and when asked if he had regrets for anything he wishes he could do over in life, he chuckled.

“I don’t think I would have started with a textile company,” he joked, referring to Berkshire Hathaway’s origins as a failing New England textile mill.

© 2016 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.

Commentary: Is a Vote Against Bill Gates’s Berkshire Board Membership Getting Closer?

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Having Bill Gates on your board of directors would seem to be a plum thing for any corporation, and for Berkshire Hathaway it’s something they have enjoyed for the last twelve years since he was elected to the board in 2004.

However, according to a report in the Financial Times, UK-based asset management companies Legal & General Investment Management and Aberdeen Asset Management have announced they will vote against board members that have been serving more than fifteen years.

The move is no threat to Bill Gates at this time, but would impact three of Berkshire’s board members that have been serving for more than fifteen years.

Paul Lee, head of corporate governance at Aberdeen, feels that board members “go a bit stale” if they serve for an extended period.

The view that long-term board membership makes a board of directors to compliant and lacking in independence is at the heart of the move to create more turnover. Another issue that often cited is to foster more board diversity, which at most U.S. corporations is overwhelmingly male and white.

Berkshire Hathaway’s thirteen member board has three women, with the most recent one to join being Meryl Witmer, an investment fund manager for Eagle Capital Partners.

So, should you toss Bill Gates off your board after fifteen or twenty years because you have an arbitrary policy on the length of board membership?

Doesn’t make much sense to me.

Corporations should be looking for board members that provides the best advice and oversight. Berkshire’s board will play a key role in the selection and oversight of Warren Buffett’s successor. A deep knowledge and belief in Berkshire Hathaway’s corporate culture is one of the key things they can contribute. They also need to weigh the value of having stability, and in the case of Bill Gates, having a high-profile board member that gets listened to every time he comments, whether it is in the boardroom, or in the press.

© 2016 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