Who Will Be The Next CEO of Berkshire Hathaway?

Who Will Be The Next CEO of Berkshire Hathaway? Warren Buffett was born in 1930, just as the pain of the Great Depression was settling in. While he was far too young to understand the state of the economy, he certainly felt the impact of a family touched by hard times as he grew older.

Whether because of that or in spite of it, Buffett took an interest in the world of finance. He dove into his education with a sense of purpose, eventually graduating from Columbia Business School.

Buffett launched his own firm, Buffett Partnership, Ltd., in 1956. By 1962, he had already tasted some success. That inspired him to buy textile company Berkshire Hathaway, which he transformed into an investing empire over the five decades that followed. Today, Warren Buffett has amassed a fortune in excess of $100 billion.

As Buffett entered his 10th decade, it’s no secret that he will have to name a successor in the relatively near future. Rumor has it that the person has already been chosen, though no formal announcement has been made.

Investors and market analysts who follow Berkshire Hathaway are fairly certain they know who will take the reins when Buffett steps down. They say they know who will be the next CEO of Berkshire Hathaway. Are they right? 

Berkshire Hathaway: The Buffett Era

Berkshire Hathaway wasn’t always a holding company. Before it was acquired by Buffett’s firm, it was composed of two Massachusetts-based textile businesses – the Berkshire Cotton Manufacturing Company and the Hathaway Manufacturing Company. Those businesses dated back to the late 1800s. They had joined forces in 1955. 

When Buffett took over, he kept the name and transformed the business. He branched out, dipping into a variety of industries, always with his underlying value investing strategy in mind. The textile operations continued for 20 years into Buffett’s tenure, but in 1985, that division was fully liquidated. 

Buffett has focused Berkshire Hathaway’s investments on companies in established industries. He is a fan of financial services in particular, though Berkshire Hathaway owns stock across a variety of market sectors. Examples include: 

• AbbVie (ABBV)
• Amazon (AMZN)
• American Express Company (AXP)
• Apple (AAPL)
• Bank of America (BAC)
• Biogen (BIIB)
• Bristol-Myers Squibb (BMY)
• Coca-Cola (KO)
• General Motors (GM)
• Johnson & Johnson (JNJ)
• Kraft Heinz (KHC)
• Kroger (KR)
• Mastercard (MA)
• Procter & Gamble (PG)
• T-Mobile (TMUS)
• United Parcel Service (UPS)
• Verizon Communications (VZ)
• Visa (V)
• Wells Fargo (WFC)

In each case, he selected the stock based on the company’s ability to generate long-term profits, and he made it a point to purchase when shares were undervalued.

That technique has served Berkshire Hathaway well, leading to astonishing profits over the past 50 years. 

Berkshire Hathaway doesn’t just buy stock in promising companies – it owns a small collection outright. Examples include: 

• Burlington Northern Santa Fe Railroad
• Dairy Queen 
• Duracell 
• Fruit of the Loom
• GEICO

One calculation completed in February 2020 demonstrated that if an investor had put $1,000 into Berkshire Hathaway in 1965, those shares would have grown to $27 million. For perspective, the same $1,000 in the S&P 500 would be worth just $200,000 today. 

When Will Buffett Step Down?

Aside from who will be the next CEO of Berkshire Hathaway, the big question is when will Buffett step down? The answer is about what you would expect from a man who has described his company this way: 

Berkshire is my first love and one that will never fade. 

Warren Buffett said this to a student who asked him about his plans to retire: 

About five to 10 years after I die.

While he doesn’t insist that others work past retirement age, sticking around is part of the company culture.

Berkshire Hathaway’s Vice Chairman Charlie Munger remains an integral contributor to the organization at the age of 98, and Buffett is known for encouraging his team to ignore the traditional retirement age.

When taken together, those facts indicate that as long as Buffett remains in good health, he will continue in a leadership role at Berkshire Hathaway.

Who Will Be The Next CEO Of Berkshire Hathaway?

Warren Buffett and Berkshire Hathaway’s Board haven’t named the next CEO of Berkshire Hathaway, but they have dropped strong hints. One of the most compelling came in Buffett’s 2020 annual shareholder letter.  

There, he noted that two of the company’s Vice Chairmen will be more visible in coming events: Ajit Jain, the Vice Chairman of Berkshire Hathaway’s insurance division, and Greg Abel, the Vice Chairman of just about everything else. 

This is aligned with Buffett’s strategy over the course of his career. He has long told his key leaders that he doesn’t want them to retire, but he has asked them to share the name of their choice for a replacement “just in case”. 

Buffett has made it clear he doesn’t intend to retire, but isn’t ignoring the need for succession planning when it comes to his own role with the company. He said: 

Charlie and I long ago entered the urgent zone. That’s not exactly great news for us. But Berkshire shareholders need not worry: Your company is 100% prepared for our departure. 

Ajit Jain Berkshire Hathaway Legacy

According to Warren Buffett, Ajit Jain has been responsible for more growth in Berkshire Hathaway’s value than anyone in the history of the company – and that includes Buffett himself. However, there is one small problem. 

Buffett has specifically said that both he and Berkshire Hathaway’s directors would like to put a relatively young person in the job. They believe the company will be better served by a CEO who can stay in the position for many years. In 2014, Buffett said this in his annual letter to shareholders: 

Our directors also believe that an incoming CEO should be relatively young so that he or she can have a long run in the job.

Ajit Jain will be 70 in 2021. 

Will Berkshire Stock Fall When Buffett Leaves?

It’s hard to predict whether Berkshire stock will fall when Buffett leaves the business. For many, Warren Buffett is Berkshire Hathaway.

However, it is clear that Buffett loves his company, and he has no intention of letting it fail – whether he is around to guide decisions or not. That should give shareholders confidence that whoever takes over is highly qualified.

In the end, the precise impact Buffett’s departure will have on Berkshire Hathaway stock will depend on a variety of factors, including the market conditions at the time of transition. 

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.