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Warren Buffett and Beyond

April 26th, 2004 · No Comments

Barron’s looks at Berkshire Hathway and likely successor to the “Great One”:

Berkshire’s Class A shares have broken out of a three-year trading range and fetch $93,000, up 10% for the year to date. The company’s business prospects look better than ever. Operating earnings, a record $3,531 per share in 2003, could approach $4,000 in 2004. Book value may exceed $55,000 per share by year end. And Berkshire is sitting atop $31 billion of cash, a reflection of Buffett’s reluctance to make major new investments.

Yet also on the minds of many attendees will be a less uplifting subject — the issue of succession. Buffett, who turns 74 in August, probably is the toughest act to follow in American business, due to his extraordinary talent and legendary success. He commands a company with $64 billion of annual revenue and $142 billion of market value, whose shares have risen 5,000-fold since he took control of what was then an ailing textile firm in 1965.

It is entirely possible Buffett still will be running Berkshire a decade from now. But in the event life has other plans, he is leaving less and less to chance. In this year’s shareholder letter Buffett wrote more about the succession issue than he has in the past, noting the “primary job” of the company’s board of directors “is to select my successor, either upon my death or disability, or when I begin to lose my marbles.” He added that the 11-member board continues to evaluate the “strengths and weaknesses of the four internal candidates to replace me.”

Who are these four candidates? The odds are Berkshire Hathaway’s next chief executive will be one of five top company executives: Joe Brandon, CEO of General Re, the largest insurance division within Berkshire; Ajit Jain, head of Berkshire’s lucrative specialty reinsurance operations; Tony Nicely, CEO of Geico, Berkshire’s fast-growing auto insurance division; Rich Santulli, CEO of NetJets, the leading provider of fractional ownership in corporate jets, and David Sokol, the CEO of MidAmerican Energy, an Iowa-based utility and the largest noninsurance division within Berkshire.

Tags: Management

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