Buffett's Baton Passed On

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The image above is an AI generated image of Warren Buffett sitting at his favorite place, enjoying his favorite drink. Sitting at his desk at the company he founded, still at 94, with a Coke in his hand is how I picture Mr. Buffett. Isn't AI amazing!? While the image is not real, what is real is Warren Buffett surprised the world with the announcement last Saturday that he was retiring as the CEO of Berkshire Hathaway - even his successor, Greg Abel, was surprised. The news was a spoiler alert for me. I had set my TV to record the annual Berkshire Hathaway shareholder meeting that CNBC was broadcasting live from Omaha. It was a 6 hour show. I watched the first 5 hours over the weekend and decided to tune it for the last hour Monday. You can guess what the first thing I learned by turning on the business news early Monday morning. "Berkshire shareholders are ‘stunned’ as Warren Buffett announces plan to step down after 6 decades", is what I read. I still watched the last hour.

Greg Abel has some very big shoes to fill at year end when Mr. Buffett passes on his baton. Warren Buffett has established himself as one of the most distinguished investors of all time through his exemplary stewardship of Berkshire Hathaway. His investment philosophy is rooted in value investing, a discipline emphasizing purchasing undervalued assets with long-term growth potential. Buffett’s disciplined approach, combined with profound market insights, has yielded extraordinary financial results and set a benchmark in the world of investment. Under Buffett’s guidance, Berkshire Hathaway has become a conglomerate of diverse businesses, exemplifying strategic diversification and disciplined capital allocation. His exceptional investment insights have not only amassed unparalleled wealth but also influenced countless investors and financial standards worldwide. His sense of a solid business coupled with his long-term vision and patience led him to buy companies such as GEICO, See's Candies, Benjamin Moore paint and Clayton Homes. His diversified portfolio of companies include energy, transportation, finance, textiles and industrial equipment manufacturing. In total, Berkshire Hathaway has 189 "Operating Companies", which are companies it owns as opposed to investments it holds in public companies such as Coca-Cola and Apple. Just think about the amount of confidence Buffett must have in Mr. Abel. He has praised Abel's business acumen, his understanding of Berkshire Hathaway's culture, and his ability to lead and manage a diverse range of businesses. He expressed his ultimate trust in Abel when he said to close Saturday's shareholder meeting, “I think the time has arrived where Greg should become the chief executive officer of the company at year end.” While this announcement by Warren was a surprise, it was only the timing that was not expected. Greg was known to be Buffett's heir apparent. In this year's Letter To the Shareholders, Warren wrote, "At 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters. Greg shares the Berkshire creed that a “report” is what a Berkshire CEO annually owes to owners. And he also understands that if you start fooling your shareholders, you will soon believe your own baloney and be fooling yourself as well."

Mr. Buffett was asked a long list of questions over the 6 hour shareholder meeting. Two were what investment plans does he have for the roughly $350 billion Berkshire Hathaway now has in cash (and equivalents), and will the company pay a dividend. It is hard to guess how Buffett plans to invest that mound of cash. One thing we know is he is patient, and is able to "Just sit there and watch pitch after pitch go by and wait for the one right in the sweet spot," as he has said of himself. Bill Gates once said about Buffett, “Warren likes to say that a good business is like a castle and you’ve got to think every day: Is the management growing the size of the moat? Or is the moat shrinking?" $350 billion can buy a lot of castle! On the topic of dividends, Buffett has long opposed to paying one, but that may change with the new CEO. Under Mr. Abel's leadership, Berkshire may pay a dividend as early as next year. That's certainly something Berkshire Hathaway could do with its massive stash of cash.

John J. Gardner, CFP®, CPM®
Blackhawk Wealth Advisors
3860 Blackhawk Rd, Ste. 160
Danville, Ca. 94506
888.985.PLAN (7526)

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