Who will replace Warren Buffett?

The big question being asked lately at the Berkshire Hathaway’s shareholder meetings is who will replace Warren Buffett when he’s no longer able to run the ship. Buffett, 83, known for his down-to-earth personality is arguably the best investor of all time. Being a strong advocate of value investing, he has averaged a return of 19.7% to Berkshire’s shareholders since its inception. Given that his expertise is hard to replicate by others, the obvious question is who will be able to perform as well as Warren when finally gives up the throne.

Buffett himself mentions that he and the boards are “solidly in agreement” in regards to choosing the successor. He further mentions in 2012 that the next CEO will come from inside the firm’s upper executives, which includes Ajit Jain, Matthew Rose, and Gregory Abel, all of whom have been answering some of the more important questions for Buffett at the meetings. Here are some info on them.

Ajit Jain

Jain runs the giant reinsurance division at Berkshire that primarily funded the firm for stock picks. He’s 62 years old and has been with the firm since 1985. Similar to Buffett, he’s always looking for a bargain and won’t make the move until the price is right. He also shares some qualities with Buffett as an old-school thinker and an opportunistic value investor. Therefore, he seems to be favoured by Buffett the most compared to other managers. His proven track record might make him a strong contender, but there were talks among the boards about choosing a younger CEO, so that might push him back in the race quite a bit.

Matthew Rose
Rose heads the BNSF Railway, which Berkshire bought in 2010 for $44 billion. He runs the single largest unit at Berkshire. In 2013, BNSF netted earnings of $3.372 billion, a 12% improvement from 2012. Known for his results and long term vision, he is also favoured by Buffett as an “extraordinary manager.” Although Rose appears to have strong endorsements, he seems to be specialized in railway, which might not give him sufficient expertise to run a firm as diverse as Berkshire. Rose is 52 years old.

Gregory Abel
Abel, 51, runs Berkshire Hathaway Energy, a utility company bought by Buffett in 2010. Abel has been in the shadows of David Sokol, his business partner for a while, but now that Sokol resigned due to claims related to insider trading, Abel is now in the race. Last year he led the firm’s second largest acquisition, paying $5.6 billion for NV Energy. He was also named the board member of Heinz, also owned by Berkshire. Given his relatively young age and impressive credentials, he seems have just what the firm needs.

The transition might not come as soon as the next few years since Buffett is still sharp and able. Nevertheless, he will retire someday. There may be some other people in the mix that I don’t know about, but the people mentioned above seem to have a lot of potential as the next CEO.

There have been talks about Berkshire carving up itself up and selling each slice to strategic investors due to fears of management underperforming once Buffett is succeeded. Do you think this will be the case and who do you see that is most qualified?