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Berkshire Hathaway shares slipped more than 4 per cent on Monday, providing the first stock market reaction to news that Warren Buffett will step down as chief executive of the conglomerate after six decades.
Berkshire’s board of directors voted unanimously on Sunday to appoint current vice-chair Greg Abel to the top job, effective January 1 next year, with Buffett remaining chair, according to a statement shortly before the market opened on Monday.
The board meeting was held a day after 94-year-old Buffett told shareholders at the group’s historic 60th annual meeting at the weekend that he would hand over the reins to Abel.
The vice-chair, who Buffett began lining up as his successor in 2021, will take over a conglomerate worth $1.2tn whose shares have traded at all-time highs this year.
Berkshire “A class” shares closed at a record $809,350 on Friday. They fell as much as 6.8 per cent in early trading in New York on Monday, before recovering to be down about 4 per cent at $776,267 by lunchtime.
Buffett said on Saturday that “he would still hang around and could conceivably be useful in a few cases” but had not made clear that he would stay on as chair.
Berkshire, which began as a medium-sized textile business that Buffett took over in 1965, now makes much of its money from its vast insurance business, which includes companies such as Geico, as well as myriad other companies in industries from aerospace manufacturing and railways to chocolate shops.
Abel joined Berkshire as part of the company’s acquisition of a mid-sized utility business. He was instrumental in a series of acquisitions that turned the group into a giant, and now runs all of Berkshire’s non-insurance operations.
His job as chief executive will be to lead Berkshire into a new era without the investing genius of Buffett or his late partner Charlie Munger at his side.
Abel has brought a more hands-on approach to his role than Buffett, who was known to give subsidiaries a wide remit to conduct their operations.
But Abel’s management experience, including his work for decades in the energy business, is seen as a crucial attribute as Berkshire looks to grow its operating profits from a panoply of disparate divisions.
Cathy Seifert, an analyst at CFRA, said Abel brought “strong operational skills”. He had signalled to “shareholders that the company’s investment philosophy will not change under his leadership and that his focus will be on maintaining Berkshire’s ‘fortress’ balance sheet”, she added.
Buffett said last year that he believed Abel should also be charged with overseeing Berkshire’s investment portfolio, which includes its stakes in American Express, Coca-Cola and Apple.
Investors have not yet had much evidence with which to gauge Abel’s talent as an investor, and it is unclear if he will rely on two other investment professionals currently employed at Berkshire.
Abel was not expected to head up the board when Buffett eventually stepped down. Buffett has named his son Howard as his eventual successor as chair. His daughter Susie is also a director.
