Warren Buffett’s successor Greg Abel is wooing shareholders, but some questions remain

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Greg Abel at Berkshire Hathaway’s annual meeting in Los Angeles California. May 1, 2021.
Gerard Miller | CNBC

To say that Warren Buffett’s successor Greg Abel has big shoes to fill would be an understatement.

The vice chairman for non-insurance operations at Berkshire Hathaway recently joined Buffett in Japan to visit the country’s top trading houses. In a three-hour interview with CNBC, the 92-year-old “Oracle of Omaha” sang Abel’s praises, saying he’s taken on most of the responsibilities.

“He does all the work, and I take the bows – it’s exactly what I wanted,” Buffett said in a CNBC interview in Japan on April 12. “He knows more about the individuals, the business, he’s seen them all…. they haven’t seen me at the BNSF Railroad for 10, 12 years or something like that.”

Abel became known as Buffett’s heir apparent in 2021 after Charlie Munger inadvertently made the revelation at the shareholder meeting. Abel has been overseeing a major portion of Berkshire’s sprawling empire, including energy, railroad and retail.

Buffett revealed that contrary to what many might’ve thought, there wasn’t any competition between Abel and Ajit Jain, Berkshire’s vice chairman of insurance operations, for the top job. The two of them had been viewed as top contenders since they were promoted to vice chairmen in 2018.

“Ajit never wanted to run Berkshire,” Buffett said.

Skin in the game

Abel recently loaded up on Berkshire Hathaway shares with his personal assets. The 60-year-old vice chairman added to his stake in Berkshire in March, bringing the total value of his holdings in the company to about $105 million.

The move increased his skin in the game and raised hopes among shareholders that the culture will continue at Berkshire.

“What really gives you some optimism for the future of Berkshire post Buffett Munger is him buying in a significant stake in the company,” said Bill Stone, chief investment officer at Glenview Trust and a Berkshire shareholder. ”One of the beauties of Berkshire is that you always knew it was like an owner manager.”

Energy question

Abel is also known for his strong expertise in the energy industry. Berkshire acquired MidAmerican Energy in 1999, and Abel became CEO of MidAmerican Energy in 2008, six years before it was renamed Berkshire Hathaway Energy in 2014.

In 2022, Berkshire proposed spending nearly $4 billion to help generate more wind and solar power to Iowa. At the same time, the conglomerate has been dramatically increasing its exposure to two traditional energy companies — Occidental Petroleum and Chevron. Some shareholders want Abel to address these moves in the industry.

“That’s the question for him. Help us understand why you are simultaneously being aggressive with your solar and wind investments in Iowa, and buying oil and gas stocks at the same time,” said Bill Smead, Smead Capital Management chief investment officer and a Berkshire shareholder.

‘Time will tell’

While shareholders have grown more confident in Abel’s capabilities, some key questions about the eventual succession linger.

“When opportunities arise, who has the ultimate decision? Is it the board? How does dispute resolution work if there is a dispute,” said a Berkshire shareholder, who spoke on the condition of anonymity.

Abel’s track record of more than two decades at the conglomerate convinced Buffett that the two are on the same page in terms of deal-making and capital allocation.

 ”It’s already improved dramatically, the management of Berkshire. And we think alike on acquisitions. We think alike on capital allocation. I mean, he’s a big improvement on me, but don’t tell anybody,” Buffett said in Japan.

Apart from Berkshire’s massive operations, the conglomerate has a gigantic equity portfolio worth north of $300 billion managed by Buffett. His two investing lieutenants, Todd Combs and Ted Weschler, oversee about $15 billion each.

“Only time will tell. There are companies that have done exceptionally well after their founders passed, like Apple, but others have struggled, like GE,” said another long-time shareholder who asked not to be named.

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