Buffett’s Virtual Meeting Turns Spotlight on Potential Successor

(Bloomberg) -- The quirks of an annual meeting in the time of quarantine gave Berkshire Hathaway Inc. investors their most extensive look at a man who could succeed Warren Buffett.

Spaced apart from Buffett on stage, deputy Greg Abel spent more time than usual fielding shareholder questions on topics ranging from how Berkshire's businesses are handling the pandemic to opportunities for lending deals. Chairman and Chief Executive Officer Buffett still dominated the online meeting Saturday and made no indication he would step down soon, but Abel's presence gave investors a better view of an executive who normally stays behind the scenes.

“He demonstrated very broad knowledge across the company. He's clearly very intelligent,” said David Kass, a professor of finance at the University of Maryland's Robert H. Smith School of Business. Buffett and Abel showed they're “on the same wavelength, they think the same.”

The succession question is ever-present at Berkshire given that Buffett is 89 and his longtime business partner Charlie Munger is 96. For decades, Berkshire investors have flocked to Omaha, Nebraska, to hear the pair impart advice and observations as they turned an ailing textile business into a conglomerate now valued at more than $443 billion. But Buffett said in his annual letter released this year that he and Munger “long ago entered the urgent zone” and that Berkshire was “100% prepared” for their departure.

Abel, a vice chairman for non-insurance operations, and Ajit Jain, a 68-year-old vice chairman overseeing the insurers, have long been seen as the top candidates to replace Buffett one day, with the billionaire investor calling them “outstanding individuals” in his most recent letter. Both Jain and Munger were absent from this year's annual meeting because they live farther away from Omaha than Abel. Munger was in fine health, Buffett noted Saturday.

Berkshire watchers have focused most on Abel, 57, in recent years. An accountant by training, he helped build the company's energy empire, playing an active role in hashing out deals. That's a key skill for any Berkshire leader hunting for ways to supercharge growth.

He's long served as a deputy for Buffett, holding a role on Kraft Heinz Co.'s board. Now, he oversees all of Berkshire's non-insurance businesses, a mandate that includes railroad BNSF, Dairy Queen and even a collection of retailers.

“In order to be a vice chairman at Berkshire, you both have to be highly talented but also believe in the principles of Berkshire,” said Richard Cook, a partner and portfolio manager at Cook & Bynum Capital Management. “That matters a lot to Buffett.”

During Saturday's annual meeting, held online this year, Abel gave investors a sense of how those operations were adjusting to the coronavirus pandemic and economic landscape. He also fielded broader questions about Berkshire's prospects, such as financing deals. He defended Berkshire's ability to land lucrative opportunities once Buffett's gone and the benefits of a conglomerate, a structure that could face an attack by an activist investor.

“Without Warren and Charlie at the helm, I don't see the culture of Berkshire changing,” Abel said. “A large part of that is having the business acumen to understand the transaction, the economic prospects and then the ability to act quickly.”

The scene, including Buffett's description of Abel as a good capital allocator alongside investing deputies Todd Combs and Ted Weschler, “strongly” signaled that Abel is the most likely candidate, Meyer Shields, an analyst at Keefe, Bruyette & Woods, said Sunday in a note to clients.

“Mr. Abel's expressed preference for Berkshire's ‘unique structure' (i.e., its ability to invest cash flows from any of its diverse operations) makes any sort of near-term post-Buffett breakup extremely unlikely,” Shields said.

Still, nothing is set in stone. Buffett has yet to publicly name a successor and has a handful of executives who could take over. The legendary investor demonstrated yet again at this year's meeting that he's still mentally sharp, according to Kass.

“Listen, there's no one better than Warren and Charlie,” Abel said. “But equally, we've got a talented team in Berkshire, both at the Berkshire level and within our managers that can obviously look at opportunities too, very quickly.”