“I’ve had suggestions from shareholders, media and board members that Ajit Jain and Greg Abel — our two key operating managers — be given more exposure at the meeting. That change makes great sense,” Buffett said in the letter late on Saturday, adding that investors can direct questions to the pair. “They are outstanding individuals, both as managers and as human beings, and you should hear more from them.”
The billionaire investor’s annual letter — scoured by investors for clues on succession and Buffett’s outlook for the $560 billion conglomerate — gave no further clues on his eventual replacement, and no indication he’d step away soon after more than five decades at the helm. But the next CEO will need to figure out how to deploy the cash Berkshire rakes in every quarter, a responsibility Buffett finds increasingly challenging because of Berkshire’s “huge and ever-growing sums of money.”
“The opportunities to make major acquisitions possessing our required attributes are rare,” Buffett said. “Far more often, a fickle stock market serves up opportunities for us to buy large, but non-controlling, positions in publicly traded companies that meet our standards.”
Both Jain and Abel have proven themselves as dealmakers before. Buffett praised Jain in this year’s letter for striking the 2012 deal for Guard Insurance Group, run by Sy Foguel, with the company’s premium volume having climbed 379 per cent since the purchase. Abel, meanwhile, built the energy empire that now has footholds in states including Nevada, Oregon and California, and operations in the UK.
Giving the pair more speaking time is “very revealing and important,” James Armstrong, who manages about $825 million, including Berkshire shares, as president of Henry H. Armstrong Associates. “Greg and Ajit are now formally running these giant groups, which are the heart of the company, and I think it’s important that the stockholder base as well as the general public and the media become familiar with them.”
Buffett is struggling to maintain the stock performance that’s made him famous. Last year, Berkshire shares notched their worst underperformance versus the S&P 500 in a decade, and the stock is lagging behind the index this year too. That’s partly due to a dearth of major deals, leaving his cash hoard at close to a record level.
Berkshire took a more cautious approach to the broader stock market in the fourth quarter, being a net seller of equities such as Wells Fargo & Co and Goldman Sachs Group Still, the company ramped up its appetite for its own stock, spending a record $2.2 billion buying back Berkshire shares. Buffett even asked investors to contact Berkshire if they went to sell their stock.
“Tonally, this letter felt more business-like,” Jim Shanahan, an analyst at Edward Jones, said in an interview. “There just wasn’t quite as much of the folksy wisdom and the humor that we’ve come to expect.”
One order of business Buffett discussed was how his enormous Berkshire stake will be apportioned after he’s gone. He estimates it’ll take between 12 to 15 years for his Berkshire shares to move into the market after his death, but wanted to reassure investors about the future of the company once it’s no longer run by the billionaire investor and business partner Charlie Munger, who turned 96 this year. His confidence, he said, stems from Berkshire’s top managers, the directors who will serve as “guardians” of the culture and the structure of his sprawling conglomerate.
“Berkshire shareholders need not worry: Your company is 100 per cent prepared for our departure,” Buffett said.
To read the full story, Subscribe Now at just Rs 249 a month
Already a subscriber? Log in
Subscribe To BS Premium
₹249
Renews automatically
₹1699₹1999
Opt for auto renewal and save Rs. 300 Renews automatically
₹1999
What you get on BS Premium?
- Unlock 30+ premium stories daily hand-picked by our editors, across devices on browser and app.
- Pick your 5 favourite companies, get a daily email with all news updates on them.
- Full access to our intuitive epaper - clip, save, share articles from any device; newspaper archives from 2006.
- Preferential invites to Business Standard events.
- Curated newsletters on markets, personal finance, policy & politics, start-ups, technology, and more.
Need More Information - write to us at assist@bsmail.in