Berkshire Hathaway Annual Meeting: What Investors Need to Know About Warren Buffett’s Successor

Ivanna Hampton: Welcome to Investing Insights. I’m your host, Ivanna Hampton.

Warren Buffett is drawing investors to his hometown of Omaha, Nebraska this weekend. Berkshire Hathaway’s annual shareholder meeting will provide them an opportunity to hear from the legendary investor and his team. Joining me on Investing Insights is Gregg Warren, a senior analyst with Morningstar Research Services, who has covered Berkshire for the past 15 years. Gregg has also participated in the meeting himself, pitching questions as part of an analyst panel for years, and he’s still coming up with questions that he believes deserve answers to benefit investors like you.

It’s good to see you, Gregg.

Greggory Warren: Good to see you.

Morningstar Analyst on Pitching Questions at Berkshire Hathaway Annual Meeting

Hampton: Well, you bring a unique perspective to the Berkshire annual shareholder meetings. Can you briefly describe what it’s like to be on the analyst panel?

Warren: Well, it is interesting because, you know, during a period from 2012 to 2019, Berkshire actually had two separate panels at the annual meeting. One was three journalists, and one had three analysts, and they were responsible for asking questions of Buffett and Munger during the meeting, interspersed with the shareholder questions that would come through. Buffett’s idea for doing this was to get more insightful questions in about the business and being able to inform shareholders a bit more about what was going on in the business in a lot of the different things that they were doing. I had the benefit of being on between 2014 to 2019.

I still feel like that was, you know, those years that they had the panels there were sort of the best years for getting information out of Berkshire. I mean, the company’s historically been very insular. They don’t talk to analysts. They don’t talk to large institutional investors. They try to make it, anything we’re seeing in the media or any of this at the annual meeting is where they like to relay information to shareholders.

So, we feel like that was a very, very rich time for the company to be more open, be more transparent, have questions directly put to them. Kind of a shame, you know, they killed it. Part of it, I think, was it was already in the works before the pandemic hit. But I think that really sort of pushed it over the edge. They’ve not really returned to any of that. Becky Quick is the sole aggregator of questions from outside of the convention hall at this point. But, we still feel that it was a good way to get questions to Buffett and, back when Munger was still alive, to him. Every year, we still now try to put out at least 10 questions that we think should be asked at the annual meeting, and that’s kind of why we’re here talking today.

Succession Planning for Berkshire Hathaway’s Insurance Business

Hampton: Got it. So, let’s talk about your question about succession planning concerning insurance business leader Ajit Jain. Who would be the ideal candidate to replace him, and why is it important to make the right choice?

Warren: Yeah. That’s actually a great question, because there’s been so much focus over the years about who‘s going to succeed Buffett. But when you look at the insurance business, that’s about half of their pretax earnings, and about half the value that we ascribe to Berkshire overall comes from just that operation. And it’s not just one business. You’ve got a multitude of different business lines from auto insurance, to commercial insurance, to catastrophe insurance, and then reinsurance. So, it’s a sprawling empire of insurance businesses. And Jain’s been actually overseeing all of that since 2018, and, in my opinion, he’s done a very, very good job beyond what he did for the 40 years that he was running a lot of the reinsurance operations.

As far as who‘s going to replace him, we’ve just not heard a lot over the years out of Berkshire. They did discuss this a bit at last year’s annual meeting. Buffett actually came out and said, “We’ve got a line of succession in place.” Jain kind of joked about having to sit down with the board every year, and they wanna know who‘s going to take over if I get hit by a truck. So, there was some sort of discussion about the process, but I think Warren didn’t do anybody any favors by then coming out and saying, “Well, nobody could really ever replace Jain.” What he does is truly unique and there’s no replacing him. As far as candidates to replace him, I think Peter Eastwood over at the Specialty Group would be possibly in the running. The current chairman of Gen Re I think is also there, as well as the president of that company. I can’t remember her name. I think it’s Raiguel. Over the years, Jain’s really sung her praises, said that she’s really been a big help for him on the reinsurance side. I can’t remember his name now—the guy that came in from Alleghany, when that was sold to Berkshire, he actually used to run Gen Re back in 2001 to 2008, I believe, and then ended up running Alleghany just before Berkshire ended up buying it. I think he could be a possible candidate. I mean, Buffett’s known him for years.

Todd Combs might be in the running. He’s been running Geico since 2019, but when I look at the other candidates, I think he’s kind of a dark horse in that regard. I think they’d probably be happy just to let him keep running that business, which he’s done a fantastic job of doing. But overall, yeah, it’s really hard to identify a single candidate that would probably be best. And I think that’s why that question needs to be put to Berkshire: At least give us the names of two, three people that they think are ideal. They did that for years with Buffett’s role. I mean, highlighting both Greg and Matt Rose, who used to run the railroad, and Ajit as possible candidates for Buffett’s role over time.

What Investors Need to Know About Warren Buffett’s Successor

Hampton: And we know that Greg Abel is going to succeed Warren Buffett as the company’s executive. He’s also going to serve as their chief investment officer. Talk about what you will want to know about Abel as an investor.

Warren: Yeah, it was kind of funny because he sort of blurted that out at last year’s annual meeting about Abel taking over all the investment decisions. And my initial thought was, “Wow, he just threw Todd Combs and Ted Weschler under the bus.”

It’s interesting because those two guys were hired more than a decade ago with the assumption being that over time they would manage the entire insurance investment portfolio, which is fairly large at this point. I think it’s over $500 billion. But, you know, just things have happened over time. I mean, the last we heard, they were each managing about $30 billion relative to a $300 billion stock portfolio. So not really integrated heavily yet into running them. And as I said, Todd Combs has been running Geico since 2019, so not really sure that he’s 100% committed to the portfolio management side of things. But I still look at Greg as probably being more a capital allocator and chief than overseeing all the investment decisions. And I think that’s kind of what Warren meant. He’s going to oversee a lot of the big, whether they’re buying new businesses or they’re actually committing large amounts of capital to stocks. I mean, historically, when you look at the portfolio, anything under a billion dollars is always assumed to be Todd and Ted making transactions. Whereas, to get over that billion-dollar threshold, it really had to have Warren signed on to get involved and buy into a stock. So I think that that’s kind of where he was.

As far as an investor goes, I know Abel’s been really involved in a lot of the negotiations with the Japanese trading houses. At this point, they have about $25 billion invested in those five companies. And it is sort of an intricate relationship. It’s not just dealing with the management there, but they’ve actually been buying all that stock with local currency. So they’ve been issuing yen-denominated debt in order to finance what they’ve been doing there. So it is a little bit more complicated investment structure. So it’s good to see Greg doing that. But, you know, I’ve always sort of looked at him as being the guy that would expand out Berkshire’s energy and utility business, longer term. I mean, looking at potential deals like Alion Energy I think is more in his wheelhouse. But if he does end up buying stocks, I’m curious. I mean, I’d love to have the question asked this year, where has he focused in the market? You know, where does he think there’s value to be had for Berkshire and stocks in the long run?

Should Greg Abel Spin Off Berkshire Hathaway’s Businesses or Issue a Dividend?

Hampton: And Berkshire is a conglomerate. Other companies like GE GE have done spinoffs. Buffett says no to the idea. Should Greg Abel say yes when he’s in charge? And why would you think it would create value for investors?

Warren: Yeah, it’s always been sort of an over-my-dead-body response when everybody’s brought up the notion that maybe Berkshire’s gotten too big. I mean, if you look at the returns, it is getting harder and harder for them to generate excess returns, you know, especially keeping so much cash and securities on the books. I mean, when you look at the insurance investment portfolio, relative to their annual loss reserves, it’s usually been about two, or two-and-a-half times. I think this past year was almost three times what they need to have on hand to keep the regulators happy. So from that perspective, there’s a lot of bloat there.

And I think from that perspective, you know, Greg‘s probably first order of business just needs to be working down some of that cash. And I think part of what’s been responsible for the bill is I think Buffett giving him that flexibility. You know, “I’m going to build up this ton of cash. You can go out there, you can buy back a ton of stock.” You can issue a special dividend, you know, maybe even a regular dividend when he dies because there’s just concern that there may be pressure on the shares once Warren passes, especially from class A shareholders selling.

So I think that’s like priority number one for him. And that creates value. I mean, you know, buying back a ton of shares is beneficial to the remaining shareholders. And then, having a special one-time dividend or a regular dividend is also a benefit and potentially brings new shareholders to Berkshire, those who are dividend-focused.

• Berkshire Hathaway stock value (BRK.A BRK.B)
• GE Aerospace stock value (GE)
• Apple stock value (AAPL)
• Bank of America stock value (BAC)
• American Express stock value (AXP)
• Coca-Cola stock value (KO)
• Moodys stock value (MCO)
• Procter & Gamble stock value (PG)

Beyond that, there’s really sort of looking at that stock portfolio. Do we really need that much in equities? And I’m not really sure how the regulators are going to approach Berkshire once Buffett’s gone. He’s sort of kept them happy by keeping $30 billion, $35 billion in cash on the books as a backstop for the insurance business. But when you look at their portfolio, it’s very, very heavy equities. When you look at competitive firms, there’s just no comparison. I mean, they have a lot committed to equities that probably need, will need to be winnowed down once Buffett’s gone.

It’s just the problem there is finding things to trim down. I mean, Buffett did a good job of trimming down both Apple AAPL and Bank of America BAC last year, but when you start looking at a lot of the other large holdings, you start getting into pieces that have been legacy positions—American Express AXP, Coca-Cola KO, Moodys MCO—that have been there for 30, 40 years, and the cost basis is really, really low. So, they’re going to have to think about tax consequences if they do that. But it also could be something where, just applying some financial engineering, spinning those off to shareholders, is beneficial for shareholders. They have, you know, that stake now. They can do whatever they want with that. And there’s other businesses within Berkshire, like the railroad, that could eventually be spun off. And again, it’s giving value to shareholders, maybe unlocking value that’s not being appreciated in Berkshire right now.

And Berkshire will still retain a bit of a stake, but, you know, the longer-term benefit for Abel is if he gets some of that bloat down, some of the asset side of the balance sheet also helps reduce the equity, which helps him be put in a position where he can earn excess returns over time.

What We Are Listening for From Buffett on His Stock Sales at the Berkshire Hathaway Annual Meeting 2025

Hampton: I’m glad you brought up the stock portfolio because that’s my next question. You’ve written that Buffett is acting less like a buy-and-hold-forever investor. He has sold billions of dollars of Apple and Bank of America stock. What do you question about those eyebrow-raising sales? They’re adding to the already giant cash hoard. And what would you hope to hear from Buffett about that?

Warren: Yeah, it is interesting because he got sort of this reputation for being a buy-and-hold investor forever. And that came from a comment he made 30-some years ago in one of the annual letters about his favorite holding period is forever. But that’s just not really been the case. I mean, there’s maybe a few stocks within the portfolio that he’s bought and not really touched—you know, American Express, Coca-Cola. Well, Moodys, can’t say that because he’s done some trading in that. But it’s not necessarily true.

When you look at Bank of America, you look at Apple, those were both bought within the past decade, you know? And I feel with Apple, it was really sort of about portfolio diversification. Before they started selling it, it was 50% of the portfolio. Just a huge position. That was a risk, you know, overall. And they were up 700% from where they bought it. So, it made sense to take money off the table and in. And I think his attitude, too, was ensuring that Berkshire didn’t fall into the tax trap that the Biden administration set with the Chips Act, the legislation that came in through that, where basically, they were sort of insisting that all companies pay 15% tax regardless.

And Buffett’s really, Berkshire’s really benefited over the years from having the energy business investing a lot in renewables. That’s reduced their tax base overall. And there were years where they weren’t paying 15%, so they were likely to start getting taxed on unrealized gains. And he’s like, “Well, as long as that’s going to happen, I might as well realize some here.” So, I mean, that’s part of what happened there.

But just back to the portfolio, it’s interesting to see that he’s been willing to sell his legacy positions when needed. I mean, he sold off about 40% of Procter & Gamble, which they got, when P&G PG bought Gillette, which he held back to 1989. And they sold off about 40% of that portfolio during 2010, 2012, when he was raising capital for Todd and Ted to manage. So he’s not unafraid to tap those legacy positions. I mean, our question has always been, for names like American Express, Coke, Moodys, are those sacrosanct? Could the next managers sell those off like he’s been doing here? And I think it’s a question that should be put to them, but I know the answers. It’s either going to be “no” or “that’s something for Greg to decide.” And those are both dodges. And you know, I would prefer to have him have a more nuanced conversation about what would be the benefits and what would be the downside to doing that. But again, I think the ultimate thing he’s going to say is, it really is up to Greg and Ted and Todd to decide what they do with the portfolio longer term.

Does Warren Buffett Think the US Is Still a Solid Bet?

Hampton: Got it. I wanna tap into your wealth of knowledge about Buffett and his perspective on the US market. Given what’s going on with the tariffs and other market volatility, do you think he still considers the US a solid bet?

Warren: He’s been on the record recently, I think it was a CBS News interview last month, basically saying tariffs are an act of war. He went on to make the, basically, observation that when you impose tariffs on products, consumers end up paying for it, you know, which is bad for economic growth. And it’s bad for not just the US but it’s bad for the global, you know, the world as well. Because you start getting this tit-for-tat sort of escalation of duties, it slows down shipments from overseas, like we’re seeing from China right now. I mean, I think shipments into the ports in California were down 35% last month. And then, that has a ramification here in the US.

Now, Berkshire historically has been very US-centric when either buying stocks or investing in companies, mainly because that’s what Buffett knows. I mean, he’s made some forays outside of the US, like the Japanese trading houses at times, but those have been few and far between. But he’s always been very, very supportive of the US. I mean, go back to the global financial crisis, he wrote the big op-ed about “I’m buying American and this is why you should.” And I think his attitude has always been that he will buy and always will focus on US-based businesses.

I’m curious to see what he would have to say. I feel this is a question that’s probably going to come up a few times during the meeting. I am curious to see what he has to say because we have a current administration that seems hellbent on destroying 100 years’ worth of competitive advantage that the US has had through not just the trade war, but Trump’s comments about getting rid of the head of the Federal Reserve just creates a lot of consternation around the world, and is really damaging to the US as a trusted business center, and the dollar as a trusted currency throughout the world. So, I think there’s a lot he’ll have to say about that. I think he’ll still focus on saying that the US is still the best place to run and start businesses. But, you know, I think there’s a lot of damage that could be done with this current administration that may take a long time to sort of get through, if at all.

Is Berkshire Hathaway Stock a Buy?

Hampton: And finally, Berkshire BRK.A BRK.B is currently a 2-star stock. Is it still an opportunity for our investors, Gregg?

Warren: Yeah, it’s kind of hard right now. I mean, we recently raised our fair value estimate. We went to $730.5 on the Class A shares and $487 for the Class B. The stock’s trading at about a 10% premium to our fair value estimate. If we look at, Berkshire’s been, in our view, a low-uncertainty stock, so it takes less of a margin of safety to get in. But it’d still have to come down at least 10% or more from here for us to get interested. But we’d really like to see at least a 25% decline before we start pounding the table on the stock.

It has been interesting because, you know, Berkshire has been historically a defensive stock. And in those years when the S&P 500’s been up double digits, Berkshire struggled to keep pace. But in years when the markets are down a lot, Berkshire does really well. Now, what’s funny is last year Berkshire was up more than the market was, and the market was up 25%. But this year, it’s been more true to form. You know, the stock’s been up almost 20% year to date, whereas the S&P, I think, was down almost 10%.

Hampton: So Berkshire stock owners are kind of happy.

Warren: Yeah, yeah. It’s been a good place to be. But I think we’ve seen that with a lot of defensive stocks since the start of the year. You know, a lot of people have piled into those names on concerns about what potential tariffs, trade wars, cuts to government spending, cuts to government employment, just a lot of different things, sort of uncertainty out there. And I think that safe havens like Berkshire have been a preferred place to park.

Hampton: Well, Gregg, you have a busy stretch coming up. You’ve got the shareholder meeting on Saturday. You’re going to stop by The Morning Filter podcast on Monday, talk with Susan Dziubinski and Dave Sekera, giving them a recap. Investing Insights followers, be sure to tune in for that conversation. Gregg, thank you for making time today, and thank you for coming to the table.

Warren: Thanks for having me.

Hampton: That wraps up this week’s episode. Thanks for watching and making this show part of your day. Subscribe to Morningstar’s YouTube channel to see new videos about investment ideas, market trends, and analyst insights. Thanks to senior video producer Jake VanKersen and associate multimedia editor Jessica Bebel. I’m Ivanna Hampton, lead multimedia editor at Morningstar. Take care.