Buffett May Unveil Heir Soon - Analyst Blog

Date : 04/18/2012 @ 9:48AM
Source : Zacks
Stock : Berkshire Hathaway Inc. New (BRK.B)
Quote : 200.13  -0.25 (-0.12%) @ 7:42PM
Berkshire Hath B share price Chart

Buffett May Unveil Heir Soon - Analyst Blog

Warren Buffett, the Chairman and CEO of Berkshire Hathaway Inc. (BRK.A) (BRK.B), has had no intention till now to step down from his post, but now it seems that the octogenarian will soon have to do some rethinking in this regard as there has been an unprecedented development in Buffett’s health. On Tuesday, he announced that he has been diagnosed with Stage 1 prostate cancer.

Despite an early diagnosis, the side effects of the impending treatment of the 81-year-old could be a concern. Warren Buffett has decided to undergo radiation treatment. Given his age, the radiation treatment may have a negative effect on his health. 

Nevertheless, Buffett sounded optimistic in his letter to shareholders saying that he was feeling normal and his energy level continued to be 100%.

This sudden announcement has once again raised a question about Berkshire’s succession plans in the minds of its shareholders. Buffett had already announced during the last shareholder’s meet that the prospective candidates have been finalized for the higher ranks. However, the names have been kept under wraps.

The shareholders will continue to feel anxious until they get to know the names or get more clarity on the company’s succession plans. Buffett plans to split up his single job into three parts that of a CEO, Chairman and investment management for the smooth functioning of the organization. We also believe that it is extremely difficult for any new management or individual of this behemoth conglomerate to ably fill in his shoes.

As far as the operations of Berkshire Hathaway is considered, sans Buffett, we believe the conglomerate will continue to run swiftly, with most of its businesses performing exceptionally well. Though some of its businesses have been affected in the recent years due to the U.S. downturn, they are slowly recovering with the gradual recovery of the economy.

Moreover, Buffett’s practice of letting the units’ managers handle their own operations independently, without his significant interference, is expected to keep the wheels of the business running smoothly even if he is not around. 

Though Buffett has streamlined operations to run on their own, greater concerns surround the investment role played by Buffett along with the company’s Vice-Chairman Charlie Munger, who is already 88 years old. Buffett is known as a value-investor worldwide. While he has picked up hedge fund manager Todd Combs and Ted Weschler to manage the company’s investments, utilizing the vast amount of cash that the company generates quarter after quarter is a mammoth task.

Though Berkshire has to run without Buffett someday, the two are so closely interlinked that any news relating to Buffett’s retirement from the job is bound to make headlines and spark investors’ concerns.

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