Berkshire Hathaway’s Warren Buffett wrote that he will keep a “significant amount” of the company’s Class A stock until his fellow shareholders grow comfortable with his successor as CEO, Greg Abel.
“That level of confidence shouldn’t take long,” Buffett wrote Monday in a letter to his three children and shareholders. “My children are already 100% behind Greg as are the Berkshire directors.”
Buffett, 95 years old, surprised the investing world at Berkshire’s annual shareholder meeting in May when he announced that Abel would take over as chief executive officer at year’s end. Berkshire has said Buffett would remain chairman. The company’s shares have since slumped, with some attributing the declines to a shrinking “Buffett premium”—the higher price investors are willing to pay to own Berkshire’s stock, thanks to the chairman’s presence.
In Monday’s letter, Buffett reiterated his faith in Abel. “He is a great manager, a tireless worker and an honest communicator,” he wrote. “Wish him an extended tenure.”
The succession plan will also bring changes to longstanding traditions for Berkshire followers. Abel will take over writing the annual letter to shareholders, Buffett’s assistant confirmed recently to The Wall Street Journal. And starting next year, Abel will lead Berkshire’s annual meetings while Buffett sits with the company’s other directors.
For decades, Buffett’s shareholder letters have resonated far beyond Berkshire’s investors, reaching a broader group of admirers eager to read his latest thoughts on a range of business and economic issues. But he has also written public letters laying out his charitable donations, musings about philanthropy and glimpses of his will.
Buffett wrote that he converted 1,800 Class A shares to 2.7 million Class B shares and donated them to four family foundations. Based on midafternoon trading, the donated stock is valued at about $1.3 billion. He also wrote that he would continue writing his “Thanksgiving message” in future years.
“Berkshire’s individual shareholders are a very special group who are unusually generous in sharing their gains with others less fortunate,” Buffett wrote. “I enjoy the chance to keep in touch with you.”
Some analysts have fretted in recent months about Buffett’s smaller role at the firm. Buffett’s retirement, combined with the death of his close friend and investing partner Charlie Munger in 2023, marks a new path for Berkshire, where its investing decisions might no longer carry the same weight as they did with both men at the company’s helm.
Darren Pollock, portfolio manager at Cheviot Value Management and a Berkshire shareholder, said that the letter was probably meant in part to soothe investors worried about the changing of the guard at Berkshire.
“He might be describing Greg once again, just to remind people that, yes, he’s handpicked,” Pollock said. “This isn’t some sort of fluky accident.”
Solid third-quarter results from Berkshire have helped soothe some of those concerns. The company reported a 17% increase in quarterly earnings after a pickup in its insurance business, while operating profit from insurance underwriting more than doubled from a year earlier.
Berkshire’s mountain of cash and equivalents increased to another record, with some analysts opining that it might reflect a decision by Buffett to leave big purchasing decisions to Abel. The company’s cash including equivalents ended September at $358 billion, after accounting for a payable for purchasing some of the short-term government debt, up from $344 billion at the end of June.
Buffett told the Journal in May that his advanced age played a role in the decision to step down as CEO. He began losing his balance occasionally, and people’s names sometimes evaded him. Newspaper stories began looking like they were printed with too little ink.
“I was late in becoming old—its onset materially varies—but once it appears, it is not to be denied,” he wrote in Monday’s letter. “To my surprise, I generally feel good.”
“Though I move slowly and read with increasing difficulty, I am at the office five days a week where I work with wonderful people.”