Warren Buffett, the legendary CEO of Berkshire Hathaway, recently told the story of a man who received an irritating letter from a local newspaper asking him for autobiographical information so that the newspaper staff could prepare his obituary in advance. The man ignored the letter…and then received a second one a month later—this time labeled “URGENT.” 

By his own admission, the 92-year-old Buffett entered the “urgent zone” long ago. He and his 98-year-old vice chairman, Charlie Munger, remain in control of Berkshire Hathaway, but they both were concerned enough about their inevitable demises to officially announce their succession team in May 2021. 

That presents investors with a dilemma that they haven’t faced for more than 50 years—that is, gauging how Berkshire Hathaway, one of the country’s largest and most admired companies, which owns businesses ranging from Benjamin Moore and GEICO auto insurance to Fruit of the Loom and the Burlington Northern Santa Fe railways, will fare without Warren Buffett.

Bottom Line Personal asked Berkshire Hathaway expert Adam Mead for his take on the company after Buffett is no longer in charge…


Post-Buffett Berkshire Hathaway

Buffett actually has addressed his future head on. “If I die tonight,” he has said, “I think the [Berkshire Hathaway] stock would go up tomorrow.”

There’s truth in his folksy modesty. I think Berkshire Hathaway can continue to do as well, or perhaps even better, after Buffett is gone. Here’s why…

The company will finally start paying a dividend.  It’s rare for such a large, mature company not to pay a ­dividend, but Buffett has always believed he could bring more value to shareholders by reinvesting the money in the company’s existing businesses or new ones, or by buying back company stock. For many years, however, Berkshire Hathaway has sat on a cash hoard—as much as $106 billion recently—because it has not been able to allocate the vast capital it continues to generate. Declaring a dividend would attract a legion of new investors looking for fixed income. 

The company’s core growth strategy will remain the same. Berkshire Hathaway has used excess cash from its insurance businesses for dozens of lucrative acquisitions. Buffett looks for companies with high profitability and old-fashioned values and allows them to run their businesses autonomously. His planned successor, 60-year-old Greg Abel—currently chairman of Berkshire Hathaway Energy and vice chairman of Berkshire Hathaway for non-insurance operations—has participated in many of these acquisitions.

The Berkshire Hathaway stock portfolio could do even better. ­Buffett has been famously tech-averse as an investor. Many of the company’s best stock picks in recent years have been made by Buffett’s co-investment managers—the talented former hedge-fund managers Todd Combs and Ted Weschler. With Buffett’s blessings, they invested in the 2020 IPO for Snowflake software, which is up about 90% from its initial share price, and they invested heavily in Apple  stock, which has appreciated more than 450% since it was added to the portfolio in 2016. 


While Buffett is Still at the Helm

With the succession question resolved, Buffett has fared relatively well in the bear market. Berkshire Hathaway stock is down just 3.9% this year (through September 12) versus –13.8% for the S&P 500. The company looks undervalued because many of the underlying businesses, especially energy companies, are poised to do well in the coming years.

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