These years Berkshire Hathaway meeting gave shareholders their best chance yet to hear from the man who will one day take over as CEO when Warren Buffett is gone, but Buffett said for the first time Saturday that Greg Abel would also have to take responsibility for the company's investments after he takes the helm, raising new questions about the succession plan.
Abel put his encyclopedic knowledge of the utility company which he directly exhibited for years and delved into railway activities and potential acquisitions that Berkshire was pursuing in the meantime sharing the stage with Buffett all day. For his part, the 93-year-old billionaire showed investors he's still on his toes.
Abel pointed out that a major culture shift was needed to get workers at PacifiCorp and the other utilities, who have long focused all their energy on keeping the lights on, to think about turning off power at times when there is a risk that their power lines break. cause forest fires is to big. He also said the BNSF Railroad is working to “get our cost structure in order” after disappointing results.
Follow-up was clearly a top priority for many of the thousands of people who filled an arena in Omaha to listen to the two men afterwards. the death last fall from Vice Chairman Charlie Munger. Buffett, Abel and Ajit Jain, Berkshire's other top executive who oversees the company's insurers, assured investors that Berkshire's board spends a lot of time on “what would happen to the operation if I were hit by a truck.” , as Jain put it. Finding the right replacement for any of the three will be important.
Previously, Buffett had said that when Abel becomes CEO, investment managers Ted Weschler and Todd Combs, who have also taken on the responsibility of being CEO of Geico, would manage Berkshire's massive portfolio. But Buffett said Saturday that his thinking has evolved and that “knowing Greg, I would probably leave the capital allocation to Greg.”
And Buffett said that because Abel understands companies so well, he also understands stocks.
But Edward Jones analyst James Shanahan said a good company doesn't always generate good stock unless you get the timing and position size right, and that's an art.
“I think stock picking is hard. I don't think you can just start doing that and be good at it,” Shanahan said.
Abel has a history of closing multibillion-dollar deals while heading Berkshire's utilities division for a decade, including the acquisition of NV Energy And AltaLink, but he's never been a stock picker. Weschler and Combs may be able to help Abel find the right timing and opportunities in the stock market, but Buffett said no such thing Saturday.
Abel has just reassured shareholders that “the capital allocation principles we use today will be maintained.”
“Does that give you more or less confidence after the Buffett? I would say it should give you less – not because it is a worse circumstance – but because it has not been very transparent and clearly communicated. You have to ask yourself: what else is going to change? said Cole Smead of Smead Capital Management.
Abel is absolutely trusted by the CEOs of all the diverse non-insurance businesses in Berkshire, who report to him and seek his advice on any challenges they face.
“Greg sees so much more than I do every day. So his perspective is valued, and his wisdom is something we can all benefit from,” said Dan Sheridan, who just became CEO of Brooks Running this year after his predecessor retired. He said Abel is always humble and curious about the company, even when asking challenging questions.
Pat Egan, CEO of See's Candies, added that Abel reflects all of Berkshire's core values, with the company's emphasis on integrity, caring for customers and strengthening brands, while still allowing Berkshire's subsidiaries the freedom to operate independently to operate.
“He really expects us to know our business, understand the parameters and run our business on a daily basis,” said Tim Baucom, CEO of flooring giant Shaw Industries. “So I feel like I have all the freedom in the world, but with freedom comes responsibility.”
The shareholders who attended the meeting and spent hours shopping and chatting with executives at the booths that Berkshire subsidiaries set up while not listening to Buffett and Abel remain confident. Some of them even got the chance to take selfies with Abel, although Buffett no longer tours the exhibit hall publicly.
“I think they're doing well,” said Michael Grizzard, who was making the trip to Omaha from Richmond, Virginia, for the second time. “They are in good hands and I think they have a good culture.”
Smead said that even Buffett, who has easily been one of the greatest investors the world has ever seen, has had a hard time finding good investments of late that are big enough to make a difference in Berkshire, with the exception of the Apple stock of $135 billion, which is even still the largest investment. after some trim work this year.
So no matter how good an investor Abel is, it will be difficult for him to find deals big enough to provide meaningful momentum Berkshire's earnings that approached $13 billion in a down first quarter. That challenge is a big part of the why Buffett has warned Investors should not expect any of Berkshire's past “dazzling performance.”
But for now, Buffett showed that Abel may not have to take over anytime soon, as he has looked good and has long said he has no plans to retire, even as he acknowledged Saturday that he no longer has the same energy as before. CFRA Research analyst Cathy Seifert was impressed with its staying power.
“There was nothing in that performance that I found concerning or disturbing,” Seifert said.
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