The time has come to ask some ‘hard questions’ as Abel replaces Buffett as Berkshire CEO

Although it was announced about four years ago that Abel would succeed Buffett as CEO, no timeline was ever laid out. Hence, it came as a surprise to both board members and Abel himself, who was apparently unaware of the news prior to the meeting, when Buffett announced his retirement.

While stepping aside as CEO, Buffett remains as executive chairman of the firm and will continue sticking around to help Abel with major acquisition decisions but will leave the final word on these decisions to Abel.

What next?

The unexpected timing of this change of guard has raised the importance of asking some hard questions about what comes next.

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The announcement provides investors shareholders a clearer timeline of transition but increased scrutiny is to be expected from shareholders on the new CEO.

"Abel, in our view, will be held to a different standard than Buffett, with a greater focus on how well Berkshire is performing-especially with it being likely that there will be some churn in the company's shareholders as we move past the end of an era for the firm," says analyst Greggory Warren from Morningstar in a May 5 report.

Prior to the meeting, Morningstar published a special report on Berkshire Hathaway titled "Getting Closer to the End of an Era for Berkshire Hathaway" on May 1 in which it was highlighted that succession planning for the firm has started coming more into focus following the death of Buffett's longtime confidant, Charlie Munger, back in 2023.

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Ajit Jain, vice chairman of Berkshire's insurance operations (the company's most important business segment), will be turning 74 this year but very little light has yet to be shed on who would be succeeding Jain.

In addition, questions have been raised about the roles that investment managers Todd Combs and Ted Weschler would fulfill once Buffett is no longer running the show.

"While both men were hired over a decade ago to manage Berkshire's investment portfolio once Buffett departed, very little has been revealed over the years about how they have performed relative to Buffett or their own benchmarks, let alone how much capital they have been managing," Greggory's report states.

Morningstar views Berkshire as being modestly overvalued, trading at a 5.78% premium to their US$487 fair value estimate.