Warren Buffett assured Berkshire Hathaway shareholders on Monday that they need not worry about his impending departure as chief executive, and his successor, Greg Abel, was fully endorsed and pledged to remain a key shareholder.
In a letter to Berkshire’s shareholders, likely his last public interaction with them until he retires at the end of the year, the 95-year-old Buffett lashed out at Berkshire’s recently underperforming stock.
He also said Abel “didn’t live up to” his high expectations when he thought the 63-year-old first-time CEO was content.
“I can’t think of a CEO, a management consultant, an academic, a member of government — you name it — that I would choose Greg to handle your savings and mine,” Buffett wrote. “He is a great manager, a tireless worker and an honest communicator. He has an extended tenure.”
Buffett has led Berkshire since 1965, and will remain chairman of the $1.07 trillion conglomerate.
He also announced plans to step up his charitable giving to the family foundation, led by Susie, 72, and sons Howard, 70, but Peter, 67, but assured that this “in no way reflects a change in my views on Berkshire’s prospects.”
Referring to longtime second-in-command Charlie Munger, who will die in 2023, Buffett said he wants to hold a significant number of Class A shares “until Berkshire shareholders develop the comfort with Greg that Charlie and I have enjoyed for a long time.”
“That level of trust shouldn’t take long,” Buffett added. “My kids are already behind Greg 100% as a Berkshire director.”
Buffett on Monday donated more than $1.3 billion of Berkshire stock, equivalent to 1,800 Class A shares, to four family foundations headed by his children.
He has donated more than half of his Berkshire shares since 2006, primarily to the Gates Foundation, but still owns about 14 percent of the Omaha, Nebraska-based conglomerate’s stock. According to Forbes magazine, Buffett is worth about $149 billion.
Buffett is confident in Berkshire even as the premium ends
Berkshire’s shares have fallen 8 percent since early May, when Buffett unexpectedly announced he would step down, while the S&P 500 .spx 20% has increased.
Investors believe this eliminated much of the “Buffett premium” embedded in Berkshire’s stock because of the presence of the world’s most respected investor.
In his letter, Buffett said that Berkshire’s stock price would move “with difficulty,” noting that it has fallen nearly 50% three times since he took over.
“Don’t despair: America will bounce back and so will Berkshire shares,” Buffett said.
Even so, Buffett said Berkshire’s roughly 200 businesses collectively have “better-than-average potential,” and investors shouldn’t expect Berkshire to penetrate the market as it was short.
“Our size helps that,” Buffett said. “Because of Berkshire’s size and the level of the market, the views are few – but not zero.”
Abel has been Berkshire’s vice chairman overseeing non-insurance operations since 2018, and was publicly named Buffett’s likely successor in 2021.
He is widely admired by Berkshire’s business leaders for his management skills, and has performed many of Buffett’s tasks, including capital allocation. Buffett said Abel understands many of Berkshire’s businesses “much better than I do.”
The children overseeing the rest of Buffett’s fortune
After Buffett dies, his children will oversee a charitable trust that will hold all of his remaining wealth, and will have about a decade to give it away.
Successor trustees are named if they are unable to serve. Donations to the Gates Foundation will stop.
Berkshire-owned businesses include GECO Car Insurance, BNSF Railway, an array of energy and industrial businesses, and familiar retail brands such as Dairy Queen, Fruit of the Loom and CK Candy.
The group also ended September with $283.2 billion in stocks, including Apple and American Express, and $381.7 billion in cash.
Although Buffett will no longer write Berkshire’s annual shareholder letters or lead its annual meetings, he plans to continue communicating with shareholders around the Thanksgiving holiday.
“Surprisingly, I generally feel good,” Buffett said. “Even though I progress slowly and study with increasing difficulty, I’m in the office five days a week where I work with amazing people.”
