Warren Buffett, the wizard who showed the world how stock markets can be turned into wealth generators, will step aside today as the head of the trillion dollar conglomerate Berkshire Hathaway.
It was Buffett's foresight that saw him buying stocks of ailing Berkshire Hathaway in the 1960s. What was a struggling textile firm turned into one of the most successful investment giant's under the supervision of Oracle of Omaha. His fortitude delivered great results not only for himself but all those who stayed with his firm as investors and shareholders churning out millionaires over the years.
Berkshire Hathaway completely exited the textile business in 1985 closing down its last mill and transforming into a holding company for businesses spanning insurance, railroads and technology. For Buffett, who had an eye for spotting value in businesses, the biggest turning point was his longtime partnership with friend Charlie Munger. That brotherhood was more than just investing. It was about creating something more durable that would stand the test of times. Munger helped Buffet make Berkshire Hathaway what it is right now and the legend has always acknowledged his friend's role in shaping it up.
The reins of Berkshire Hathaway, worth more than a trillion dollars right now in valuation, passes in the hands of a trusted lieutenant of Warren Buffett. Greg Abel has been at the investing giant for two-and-a-half decades.
Abel, who joined Berkshire in 2000, was instrumental in turning Berkshire Hathaway Energy into one of the largest power providers in the central and western United States. His elevation to the role of CEO came last year during the annual general meeting in Omaha where Buffett announced the promotion. Abel wasn't expecting it.
Abel is committed to Berkshire's culture of letting businesses run autonomously. He has been managing Berkshire's non-insurance businesses, which include BNSF railroad, retailers such as Fruit of the Loom and See's Candies, and various other chemical, energy and industrial companies.
The insurance businesses are under the expert supervision of Ajit Jain, 74, who's a vice chairman at Berkshire and long touted to be Buffett's successor.
Striking gold
Buffett admitted that buying Berkshire in 1962 was a bad decision. The turning point came soon when he acquired insurance firm National Indemnity in 1967. This provided Buffett with a regular stream of income generated through premium collection which helped him focus on acquiring other businesses.
Another important investment early on was See's Candies that was acquired in 1972. Bought for $25 million, the investment has seen pre-tax earnings of nearly $2 billion as of 2019. This investment also marked a decisive shift in Buffett's strategy of scooping up cheap, struggling businesses to high-quality, cash generating businesses.
This strategy helped Buffett and Berkshire move to more lucrative bets as it brought capital that could be reinvested in these businesses.
Another big win for Berkshire has been its shareholding in Coca Cola. The investment came in late 1980s and has been a 'forever stock' due to its strong business model of selling concentrates to bottlers and a durable moat for its unmatched distribution network, brand recognition and pricing power.
From Fruit of the Loom to Duracell batteries to Apple, Berkshire's investment over decades has spanned businesses that have delivered returns manifold and helped its shareholders become wealthy.
With Buffett stepping down, the onus is on Greg Abel to carry forward the legacy of the titan and his genius.
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