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Berkshire Hathway’s Future

August 14th, 2003 · No Comments

Barron’s writes that Warren Buffet’s magic touch means that his company’s best days lie ahead:

With a market value of $110 billion, Berkshire is the 16th largest company in the stock market…Investors’ biggest worry is over who will succeed Buffett, who turns 73 on Aug. 30 and who many consider the most irreplaceable CEO in the country. His extraordinary business and investment skills have produced a phenomenal 38-year record at Berkshire, during which its stock has risen 4,000-fold from around 18 a share…Buffett owns 31% of Berkshire and his stake is worth over $34 billion.

There’s something about Buffett that makes sellers want to part with their businesses for reasonable prices. A major reason: He takes a hands-off approach to acquired businesses and lets the prior managers stay on to call the shots. As Buffett notes in Berkshire’s annual report, he wants strong management in place at any company he considers buying. Berkshire doesn’t send its own executives to run acquisitions. In fact, its Omaha office employs just 16 people and Buffett draws a salary of just $100,000 annually. Berkshire holders are getting the services of the world’s greatest investor very cheaply. Buffett loves his job; he’s even said that he’d “pay to do it.”

Berkshire’s Class A shares, at about $72,000, are down slightly this year, despite the broad stock-market rally, and haven’t moved much since the end of 1998.

Berkshire holders can take comfort in the company’s financial strength and Buffett’s still-magical touch. Based on Berkshire’s growing earnings and book value, it’s entirely possible that the stock could approach $100,000 by the end of 2004.

Tags: Management

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