Berkshire investors anticipate new era as Buffett hands over baton

By Jonathan Stempel

OMAHA, Nebraska (Reuters) -Berkshire Hathaway shareholders mourning the departure of legendary investor Warren Buffett anticipate the conglomerate he built over 60 years will retain its long-term focus and culture but worry about the loss of Buffett's vision and star power.

Following Buffett's surprise announcement on Saturday that he would step down as chief executive by the end of the year, Berkshire shareholders and fans said the Omaha, Nebraska-based company will remain in good hands once Vice Chairman Greg Abel takes the top job.

But they said it remains unclear how the $1.16 trillion conglomerate, which has 189 operating businesses, $264 billion of stocks and $348 billion of cash, will fare after the man so interwined with it leaves the stage.

"There has been a premium on Berkshire because of Buffett," said Mark Malek, chief investment officer at Siebert.NXT. "Will people look at it in the same way?"

Richard Casterline, a computer programmer from Denver, said it was a "bit shocking" to learn of Buffett's departure.

"I'm curious to see what the stock price will do on Monday," he said. "I don't think (Abel) elicits the same excitement. It's not any fault of his own, it's just thinking of who could be as legendary as those two are. It's just tough shoes to fill."

BUFFETT'S BABY

Still, many see Abel as right for the job.

"This is Buffett's baby, and he thoughtfully and deliberately planned for an orderly succession that does not disrupt the value of his life's work," said Daniel Hanson, senior portfolio manager at Neuberger Berman. "I have full confidence in Greg's leadership."

Richard Lancaster, an accounting consultant from Charlotte, North Carolina, likened the change to Steve Jobs handing Apple's reins to current Chief Executive Tim Cook in 2011.

"You have two different personalities, two different approaches," said Lancaster. "Greg has all the qualities Warren likes in a manager: very sharp individual, and well-versed in what's in the business climate today and the changes that will come through disruptive technologies."

Under Buffett, Berkshire's annualized shareholder return has roughly doubled that of the Standard & Poor's 500.

Buffett's aura was such that when Berkshire disclosed new common stock investments, it routinely sent the stock prices higher even if Buffett himself wasn't doing the investing.

Some analysts believe Abel may be more hands-on than Buffett in overseeing Berkshire's subsidiaries.

"Abel's going to have to tread a fine line between maintaining a Buffett-like environment, with also making his mark," said analyst Cathy Seifert at CFRA Research.

And some investors clamor for Berkshire to pay a dividend, which it has not done since 1967.

ABEL'S WAY

Abel has hinted at changes.

Prior to Buffett's announcement, which Abel hadn't known was coming, the vice chairman told annual meeting attendees he would be "more active, but hopefully in a very positive way," in overseeing Berkshire subsidiaries, though they would continue running "very autonomously."

Berkshire's businesses are diverse, including Geico car insurance, the BNSF railroad, many utility and power companies, a real estate brokerage, and retail brands such as Dairy Queen, Fruit of the Loom and See's Candies.

Another possible change: how readily Berkshire will unload businesses it owns, including when they underperform.

Buffett is known as a collector of businesses but has made exceptions, as when businesses lose competitive advantages.

In 2019, Berkshire sold its Applied Underwriters workers compensation unit, and the next year shed its newspaper empire as falling ad revenue led Buffett to brand the industry "toast."

Leaders of most Berkshire businesses have since 2018 reported to Abel, while Berkshire's insurance businesses such as Geico, General Re and National Indemnity have reported to Vice Chairman Ajit Jain, which they will continue doing.

Managers praise Abel as a quick study, despite overseeing businesses as varied as aircraft parts maker Precision Castparts, Israeli toolmaker Iscar and Borsheims jewelry.

Quick changes are unlikely. Berkshire's sheer size makes undoing Buffett's work in short order, or making a transformational acquisition, very difficult.

"Buffett has built such an amazing machine," said Nate Garrison, chief investment officer at World Investment Advisors. "It's something that will stand the test of time."

LONG LEGACY

Shareholders said Buffett's legacy will live on.

Sameer Naik, a software architect from Omaha, said Buffett taught investors to be patient when investing.

"His biggest legacy is giving investors a lot of confidence they can get rich, slower," Naik said. "If you invest in the right companies that you understand, and invest over time, good things will happen."

Pamela Taylor, a Chicagoan who works in technology sales, said she has studied Buffett's investing style for a long time.

"His strategy of buy-and-hold in particular can be very different from the quick-sell technique that other investors use," she said. "That will be his legacy."

One thing many shareholders expect will be downsized is Berkshire's annual shareholder weekend, which draws tens of thousands to Omaha for shopping and other events, including the annual meeting.

"It is an opportunity to interact with other people with the same moral compass," said Robert O'Connor, a family doctor from Victoria, British Columbia. "It's our Coachella."

(Reporting by Jonathan Stempel, Suzanne McGee and Carolina Mandl; editing by Megan Davies and Michael Perry)