Billionaire Warren Buffett warned shareholders Monday that many companies will fare better than his Berkshire Hathaway in the decades ahead because of its massive size, though others might say the company’s prospects will dim because “Father Time” is catching up with the 95-year-old icon who plans to step down as CEO in January.
Buffett reflected on life and his health in a new letter to shareholders where he announced $1.3 billion in new charitable gifts to the four family foundations run by his children that—along with the Gates Foundation—have been helping steadily give away his fortune since 2006.
Berkshire is known for consistently outperforming the stock market during the past 60 years under Buffett—which helped earn him legions of fans—although that has become harder to do in recent years because of the huge size of the conglomerate. Berkshire owns Geico insurance, BNSF railroad, several large utilities, and a diverse assortment of manufacturing and retail businesses, including such well-known brands as Dairy Queen, See’s Candy, and Helzberg Diamonds. But Buffett also reassured shareholders that he remains confident in his successor.
Buffett promised to keep in touch with shareholders through Thanksgiving letters in the future, but he confirmed that next year, Greg Abel will take over Buffett’s famous yearly letter and answer all the questions at the annual meeting after he becomes CEO in January. Buffett will remain chairman.
Buffett said that “through dumb luck, I drew a ridiculously long straw at birth” by being born in Omaha, Nebraska, where he met many lifelong friends—including several who helped shape Berkshire’s fortune—and both his wives after attending public schools. He said he has been fortunate to have his life saved three times by doctors who lived nearby while managing to avoid the kind of calamities that often cut life short.
Buffett recounted spending several weeks in the hospital after having his appendix out as a child, where he turned to fingerprinting all the nuns who were taking care of him just in case they turned to a life of crime later. Buffett previously battled prostate cancer in 2012, but that wasn’t considered life-threatening.
“Those who reach old age need a huge dose of good luck, daily escaping banana peels, natural disasters, drunk or distracted drivers, lightning strikes, you name it,” he wrote.
But now, after decades of benefiting from the fickle nature of “Lady Luck,” Buffett said, “Father Time, to the contrary, now finds me more interesting as I age. And he is undefeated; for him, everyone ends up on his score card as ‘wins.’”
Buffett said he is moving slowly and now has increasing difficulty reading, but he continues to go into the office five days a week to hunt for useful business ideas or deals that could benefit Berkshire.
Berkshire shareholders should have faith in Abel because Buffett said he has consistently met the high expectations he has for him. “He understands many of our businesses and personnel far better than I now do, and he is a very fast learner about matters many CEOs don’t even consider. I can’t think of a CEO, a management consultant, an academic, a member of government – you name it – that I would select over Greg to handle your savings and mine,” Buffett wrote.
Berkshire’s fortress-like balance sheet, highlighted by the $382 billion cash it holds, ensures the company is unlikely to encounter a devastating disaster, and Buffett said the board remains conscientious of shareholders’ interests, but still the company will have trouble outperforming.
“In aggregate, Berkshire’s businesses have moderately better-than-average prospects, led by a few non-correlated and sizable gems. However, a decade or two from now, there will be many companies that have done better than Berkshire; our size takes its toll,” Buffett said.
—Josh Funk, AP business writer