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By Jeremy Glaser and Greggory Warren, CFA | 04-23-2015 11:00 AM

What Will Berkshire Look Like Over the Next 50 Years?

Morningstar's Gregg Warren discusses potential successors to Warren Buffett and how Berkshire might change after his departure.

Note: This video is part of Morningstar's coverage of the 2015 Berkshire Hathaway Annual Meeting

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. It's been 50 years since Warren Buffett took over Berkshire Hathaway (BRK.A/BRK.B), but can the company repeat its success over the next 50 years? I'm here today with Gregg Warren--he is a senior stock analyst at Morningstar who covers Berkshire Hathaway--for his thoughts.

Gregg, thanks for joining me today.

Gregg Warren: Thanks for having me.

Glaser: Let's start with that succession question. That's obviously been on a lot of people's minds for years now as Warren Buffett gets older. We got a little bit more clarity on who the successor could be in the letter this year. Can you talk to us about that?

Warren: I'm not sure if we've necessarily gotten more clarity. We've been down this path before. At one time, Joseph Brandon was the heir apparent; another time David Sokol was the heir apparent. And we've seen both of those guys leave the firm under a cloud. Brandon left in 2008 in relation to the AIG scandal, and Sokol left due to his own personal failings in 2011. So, to pinpoint one guy who is leading one of the subsidiaries as being the heir apparent has proven to be a little bit difficult over the years. That said, I think there are probably five really good candidates for the top job. Ajit Jain, who runs Berkshire Hathaway Reinsurance; Greg Abel, who runs Berkshire Hathaway Energy; Matt Rose, who heads up BNSF; and then you have Tony Nicely at GEICO and Tad Montross over at General Re.

Now, of those five, Ajit Jain has probably gotten the most attention over the last decade or so. Greg Abel, the spotlight has been put on him this year. He got some glowing praise from Munger--both he and Jain did in the annual report. So, they've sort of become the two that everybody is focusing on right now, but I think it's a bit more of a media-led frenzy here. I think, overall, our top pick continues to be Jain. We think if the board is looking exclusively for a capital allocator to replace Warren, we couldn't think of a better person than Jain. He has done a fantastic job with Berkshire Hathaway Reinsurance, and he potentially has what it takes to look at risks and returns and make better investment decisions over the long run.

That's not to say that Abel is not qualified. We think that he is definitely on the board's mind. He is also a great capital allocator. He has done a great job at Berkshire Hathaway Energy over the last 10 or 15 years. We also think that he brings operations experience to the table--something that Jain is not necessarily lacking, but doesn't really have on the same scale. So, we think if the board is looking for somebody who is a bit more of an operator, then we could see them going with Abel; but at this point, it is sort of a two-horse race between those guys.

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