Prepared for the post-Buffett era
The new era at Berkshire has already begun
By Max Bourne
May 9, 2024, 7:03 a.m
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Investor legend Warren Buffett has no intention of retiring, even at 93 years old. Nevertheless, the transition into a new era has already begun at his Berkshire Hathaway company – and not just in terms of personnel.
“Charlie,” Warren Buffett once addressed the man next to him on the podium. But of course Charlie Munger isn’t sitting next to the 93-year-old boss at the shareholders’ meeting of the investment conglomerate Berkshire Hathaway this year. Buffett’s long-time deputy and friend died last year at the age of 99. For the first time, Buffet’s designated successor and current number two at Berkshire, Greg Abel, takes his place. Buffett and Abel react to the slip of the tongue with humor, and the assembled shareholders give an extra round of applause in memory of Munger.
The scene shows that the glorious past that made Buffett and Munger investor legends is still present at Berkshire, while the new era has already begun. Buffett leaves no doubt that he wants to continue running the company until his death. But he is clear about it and points out several times that this time could come soon. The fact that Abel is on the podium with him at the shareholder meeting, also known as Woodstock for capitalists, is a visible sign of the transition to this new era.
Not only is the group’s leadership already prepared for the post-Buffett era in terms of personnel, the competencies are distributed. Buffett once again supports Abel as the future boss and emphasizes that he should have control over all divisions of the company and also the stock portfolio, which is now worth a good 330 billion dollars. Above all, Buffett never tires of emphasizing that Berkshire has already entered a new investment era with its business model.
With the strategy that has become known as “value investing,” Buffett has provided himself and many of his shareholders with incredible returns for 60 years. Berkshire acquired undervalued companies with solid business models, integrated them into the group, improved management and profitability. When Berkshire was taken over in 1964, a class A share was quoted at just over $12; today it is over $600,000. According to the Financial Times, Buffett has outperformed the leading US stock market index by more than 100 times.
“I hope we’re a little better”
But these times of such increases in value are over. Buffett is making this unmistakably clear to his shareholders again this year. Berkshire is “better positioned than ever before.” But there are simply no longer any opportunities to take over large companies cheaply that could significantly increase Berkshire’s value.
Buffett has been complaining for years that the majority of company valuations are too high. A visible sign of this change in the investment market is the gigantic mountain of almost $190 billion in cash or liquid reserves that Berkshire has now accumulated and for which there are hardly any investment opportunities left.
What Berkshire is focused on is no longer “extraordinary returns compared to what American companies generally earn,” Buffett explains. “I hope we’re a little better.” In the circle of his shareholders, Buffett often becomes nostalgic and emphasizes how much “fun” he had working with Charlie in the old days. However, he doesn’t stop to mourn those times.
The dream returns of the past are no longer a benchmark. The focus is on reliability for investors. Buffett had already written in his last letter to shareholders that what was more important than exceeding the returns of the competition was that investors at Berkshire had a lower risk of losing their money.