Greg Abel’s Biggest Challenge – Is Berkshire Hathaway stock worthy of “Buffett” premium without Warren Buffett?
It surprised many on May 3, when beloved billionaire investor Warren Buffett announced his retirement at the 60th shareholder meeting of Berkshire Hathaway, including his designated nuclear facilitator Greg Abel.
The 94-year-old, who grew up to a $1.2 trillion business with his long-time friend, the late Charlie Munger, has bought the company's “blind faith” from investors over time. This is the legend, he is called “Oracle in Omaha”.
It is this “Buffett Senior” that may now be the biggest challenge for the next CEO, Greg Abel, now 62 years old. With investor confidence, Berkshire Hathaway enjoys leaning heavily on Warren Buffett's shoulders, his departure could have caused a sensation.
What challenges does Greg Abel face?
According to a Bloomberg report, the first of many problems Greg Abel may face is about the $350 billion cash pile left by Warren Buffett. Maverick investors sit on the money instead of investing in a turbulent market, while Abel keenly watches what he is going to do.
It is worth noting that under Warren Buffet, who is the longest CEO of S&P in 500 years, Charlie Munger, co-founder of Berkshire, issued no dividends (once in 1967). The argument is that the company creates more for shareholders of stock value than giving dividends – now that will be a pressure point.
Shareholders will also focus on Abel's leadership style, and whether he's risky, what industry he likes and whether the future Berkshire annual shareholder meeting will attract the wit, wit and celebrities of Wall Street experts and fans Warren Buffett and Charlie Munger.
Some are also worried that if Warren Buffett no longer takes the helm, Berkshire's behemoth has 180 businesses and close to 400,000 employees.
Abel Notaby said he will continue the company's tradition, with Warren Buffett remaining a major shareholder in Berkshire.
Investor Miracle: Without Warren Buffet, Berkshire deserves a “buffet premium”?
Alice Schroeder, writer or Warren Buffett’s biography Snowball: Warren Buffett and the Business of Life, told Bloomberg: “People love Warren because he has some magic. Reproducing it is nearly impossible. ”
“The concept that investors will have to end is: when Buffett is no longer there, is Berkshire Hathaway stock still worth the Buffett Premium? There may be some institutional investors who may need to pay for cash stocks and more conventional capital allocation plans.”
Over time, Abel proved his worth and believed in observers. He joined Berkshire in 1998 through a acquisition when the company purchased Calenergy. In 2008, Abel won over $1 billion in negotiations with Berkshire to win the courage of Berkshire. Then in 2013, he bought NV Energy, and the subsequent deal led to what is now the Berkshire utility business (Energy and Gas).
Warren Buffett's trust earned him a reputation and was promoted to vice chairman of Berkshire's non-insurance business, including Candy Railroad, in 2018. Then, in 2021, Charlie Munger declared him a “waiting for a while” at the company's annual shareholder meeting.
But doubts about his investment review remain. Author Alice Schroeder noted: “Greg (Abel) is a business leader and he is not responsible for investing. This will be one of his biggest challenges and the board.”
Berkshire Hathaway shareholder Cole Smead also told Bloomberg that Greg Abel promised continuity when asked what he would do with Warren Buffet’s $355 billion cash hoard and his capital allocation strategy in the final shareholder cycle.
“He struggled with this. I think like Charlie and Warren, he would look back at the early stages of his life and tell about what he went through with investing. He didn't.”
(with Bloomberg input)
