Berkshire Hathaway after Warren Buffett

What the Future Might Look Like Without the Oracle of Omaha

Berkshire Hathaway after Warren Buffett
October 24, 2014

In 1962, an investor named Warren Buffett started buying the shares of a textile manufacturing company called Berkshire Hathaway (NYSE: BRK.A). Under Buffett’s leadership as chairman, president and CEO, Berkshire Hathaway diversified and grew over the next 50-plus years into a multinational conglomerate holding company that is now one of the largest public companies in the world.

Just how successful has Buffett been in growing Berkshire Hathaway and rewarding the company’s investors? Well, if you had bought one share of Berkshire Hathaway stock in 1962 for about $11 and held onto it, your share of stock would now be worth about $190,000. This represents an annual return of 21 percent. The price of a single share of Berkshire Hathaway stock is now more than $200,000 (the company has never had a stock split and has only paid a dividend once under Buffett’s leadership).

Buffett Is Berkshire Hathaway

Learn In fact, it is probably safe to say that more people have heard of Warren Buffett — aka, the Oracle of Omaha — than have heard of the company that he runs.

However, Buffett is now 83 years old, which has led many investors and analysts to start asking the question: What does the future of Berkshire Hathaway look like without Warren Buffet leading the way?

Buffett has publically stated that there is a succession plan in place at Berkshire Hathaway. However, the phenomenal success of the company over the past half-century is mostly attributable to Buffett’s leadership and his uncanny abilities as an investor. This makes it fair to wonder how can the company possibly continue this level of success without Buffett calling the shots?

Some investment analysts think that the best post-Buffett strategy for Berkshire Hathaway is to break up the sprawling, massive multinational conglomerate into smaller units. The company currently owns (either wholly or as a significant minority owner) businesses in a literal hodgepodge of different industries: insurance (GEICO), restaurants (Dairy Queen), candy (Mars, Inc.), fractional jet ownership (NetJets), clothing (Fruit of the Loom), retail jewelry (Helzberg Diamonds), computers (IBM), soft drinks (Coca-Cola) and financial services (American Express and Wells Fargo).

Two Different Perspectives

A recent article in The Economist recommended just this: Given his “irreplaceability and unrepeatability of his past deal-making success,” Buffett should tell shareholders “that a gradual break-up will be his main recommendation to his successor,” the author wrote.

However,The New York Times recently offered a different perspective: If the next generation of Berkshire Hathaway leadership can retain Buffett’s core investing principles of maintaining a long-term focus by buying companies with “a strong ‘economic moat’ protecting them from competitors, his conglomerate should remain one.

“Mr. Buffett’s final task may be an even harder one,” the Times author adds. “To turn an advantage that has been tied together with his reputation and ownership of Berkshire stock into something that will outlive him.”

For now, Buffett has not given any indication that he plans to step down from leading Berkshire Hathaway anytime soon. But nobody lives forever — so investors considering buying Berkshire Hathaway stock would be wise to give some thought to what they think the future of the company might look like one day without the Oracle of Omaha.

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