Why the Demise of Buffett Won't Be the End of Berkshire

The ultimate departure of Warren Buffett and Charlie Munger will have less of an impact on Berkshire than many believe it will

Greggory Warren, CFA 3 August, 2017 | 8:33AM

The ultimate departure of Warren Buffett and Charlie Munger will have less of an impact on Berkshire than many believe it will. For much of the past five decades, Buffett and Munger have focused on building and acquiring businesses that would fit seamlessly into their organisation.

A big part of Berkshire's success has been due to the company's operating subsidiaries being managed on a decentralized basis, eliminating the need for layers of management control and pushing responsibility down to the subsidiary level. We don't expect much to change in that regard once Buffett and Munger depart the scene.

Where the company will be lacking is in having capital allocators of their calibre, with the knowledge and connections that they have acquired over the years, running that part of the business. That said, we are encouraged to see Buffett's two lieutenants Todd Combs and Ted Weschler getting far more involved in the operating subsidiaries, as opposed to just focusing on stocks in the insurer's equity portfolio. We like the fact that the two front-runners for the CEO job Ajit Jain, head of Berkshire's reinsurance and specialty insurance operations, and Greg Abel, head of the company's utilities and energy subsidiary, have bountiful amounts of capital allocation experience.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Berkshire Hathaway Inc Class B231.35 USD0.14

About Author

Greggory Warren, CFA  Greggory Warren, CFA, is a senior stock analyst with Morningstar.

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