The Post-Buffett Future of Berkshire Hathaway

For several years now we have been hearing that the dynamic duo of Buffett and Munger won’t be around forever, and when they’re gone the price of BRK will drop sharply and possibly never recover. The assumption is Todd and Ted (and Ajit and Greg) are no match for WB’s capital allocation skills. We also hear that this is no secret and is already baked into the price. I am unconcerned about the latter and disagree with the former for two reasons.

First, as Buffett will be the first to tell you, he does not have a crystal ball or any supernatural powers. He just follows a set of proven value investing principles that anyone (theoretically) can follow, if they were so inclined (and disciplined). Presumably, his successors will also follow them and achieve excellent results (just like the other superinvestors of Graham-and-Doddsville). The method will survive the man.

Second, I would not be surprised to see BRK improve its performance, which many have lamented has paled in recent years as the company has grown to an unwieldy size. As time goes by, the number of simple businesses that Buffett understands has shrunk in comparison with the number of businesses he doesn’t understand. Younger blood might understand them better. The recent position BRK has taken in Apple has provided a welcome boost. Relatively small, I know, but suggesting the shape of things to come.

Apple is transitioning from a riskier tech company that Buffett wouldn’t understand to a stalwart consumer goods company he would be comfortable owning. It’s currently a hybrid, with one foot in each camp. There are a lot of similar companies coming to maturity. When you combine the timeless principles of value investing with a fresh knowledge of modern business, the possibilities are exciting. I will keep adding to my position in BRK on the dips.

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