With both chief executive Warren Buffett and vice chairman Charlie Munger now well past traditional retirement age —and with Buffett yet to name his successor— should investors be wary of Berkshire Hathaway?
Not really, says Contra the Heard’s Benj Gallander, who at the same time expects a selloff when Buffett passes away.
The Oracle of Omaha may still be adept at steering holding company Berkshire Hathaway towards even greater riches —the company reported a net annual income of US$44.94 billion last year, an 87 per cent increase on 2016— but many are curious if not downright concerned about what will happen to the company once Buffett hands over the reins.
In March, Buffett released his annual letter to shareholders, where he stated frustration over being unable to find new stand-alone businesses to acquire, claiming that valuations were too high. But little was said by Buffett, now 87 years old, on the topic of succession, other than to don more praise upon two men seen by many to be in the running, namely, Ajit Jain, head of the insurance group at Berkshire, and Greg Abel, head of non-insurance operations.
“You and I are lucky to have Ajit and Greg working for us,” wrote Buffett. “Each has been with Berkshire for decades, and Berkshire’s blood flows through their veins. The character of each man matches his talents. And that says it all.”
But investor Benj Gallander says that worries about Berkshire post-Buffett are overblown, even though the stock will likely take a hit when Buffett is no longer at the helm.
“It’s a great company, no question,” says Gallander, in conversation with BNN. “One of the risks now — and I think they’ve mitigated it, to some degree — is when Charlie [Munger] dies and when Warren dies, and when that happens, I think some people will sell the company, but they seem to have plans in play for succession.”
“Warren has done an amazing job, obviously one of the best investors in the world,” says Gallander. “I don’t believe in buying and holding forever. We sold our [Berkshire] stock because we thought the value was pretty good on it. We were happy to get out; we made a nice profit on it.”
Shares of Berkshire Hathaway have treated investors well over the years. Although down roughly seven percent from a late January high, the stock has doubled over the past half-decade.