Greg Abel and Warren Buffett at the CHI Health Center on Friday, May 2, in Omaha, Neb. Mr. Buffett has nominated the Canadian Mr. Abel to take over his position as CEO of Berkshire Hathaway later this year.Matthew Putney/The Associated Press
Chris Gay is a former Wall Street Journal staffer. He has also worked or written for U.S. News and World Report, the Far Eastern Economic Review, Forbes, Slate and others. He writes the newsletter Figure at Center and owns Berkshire Hathaway shares.
In the high-pressure realm of Hard Acts to Follow, Greg Abel, an unassuming Canadian, is now centre stage in the world of investing. Mr. Abel, a 62-year-old Edmonton native and University of Alberta grad, is set to become CEO of Berkshire Hathaway by the end of the year.
The company is, of course, arguably the best investment anyone could have made in the decades since Warren Buffett took control 60 years ago. And now Mr. Buffett, for whom the adjective “legendary” seems inadequate, is departing. He announced to stunned shareholders at the company’s widely watched annual meeting on Saturday that he would relinquish the position by year’s end and recommend as his successor Mr. Abel, his designated heir long waiting in the wings.
The announcement, while a shock as it came ahead of schedule, should not be too much of a surprise. Mr. Buffett is 94 years old and has been preparing for this day for years. He obviously wants the change of leadership to be minimally disruptive, and Saturday’s announcement seems calculated to reassure. For one thing, Mr. Buffett isn’t leaving the scene abruptly or even entirely.
“I would still hang around and could conceivably be useful in a few cases,” he said. “But the final word would be what Greg said, in operations, in capital deployment, whatever it might be.”
Berkshire Hathaway vice chairman Greg Abel in Omaha, Neb., on May 2.Brendan McDermid/Reuters
By some accounts Mr. Abel, who is vice-chairman, is already running the show. He has been associated with Berkshire for a quarter century. In 2018 he became a Berkshire board member and vice-chairman for non-insurance operations. In 2021, Mr. Buffett announced that Mr. Abel would succeed him as CEO.
Mr. Abel is the definition of steady hands. He is a family man and hockey obsessive who started his career as an accountant. Mr. Abel has coached lacrosse and hockey, and the revelation of an old sports injury once led former U.S. President George H.W. Bush to label him the Canadian with no front teeth. But other than his record at Berkshire, little is publicly known about Mr. Abel. He keeps a low profile with the media and hides his political views. This is a man set on the singular task of making money for Berkshire.
Warren Buffett said on May 3 he will step down as chief executive of Berkshire Hathaway at the end of the year, and hand over the reins to vice chairman Greg Abel.
Reuters
Here’s how Mr. Abel’s friends describe him in a 2019 Globe and Mail profile: “a fiercely intelligent, hyper-efficient guy whose work is his life and who hides his talents behind a wall of humility.” Mr. Buffett, who frequently lavishes praise on his successor, has called Mr. Abel a “rare talent,” with “Berkshire blood.”
If Berkshire’s recent performance is any indication, Mr. Abel is more than up to the job. The shares closed Friday at record highs, up 33 per cent over the past year and 19 per cent year-to-date, even amidst the Trump tariff circus. By comparison, the S&P is down 3.3 per cent and the S&P/TSX Composite up 1.2 per cent for the year.
No one expects Mr. Abel to achieve the stellar results Mr. Buffett has over the past six decades, simply because he latter’s performance so off-the-charts brilliant. Berkshire shares could fall 99 per cent and still be ahead of the S&P for the past 60 years. Berkshire has generated an average total return (dividends reinvested) of 19.9 per cent over that period, versus 10.4 per cent for the S&P. Put another way, US$10,000 invested in Berkshire in 1980, when it went public at US$290 a share, would be worth US$28-million now, as against US$1.55-million in an S&P index fund.
It’s a lot harder to move the needle on Berkshire’s US$1.1-trillion in current assets than it is on, say, a mere US$100 billion, but there’s no reason to think that Mr. Abel won’t at least continue to beat the broader market using Mr. Buffett’s famous value-investing concept. That involves buying undervalued companies and holding them long-term, an approach Mr. Buffett learned from Benjamin Graham, “the father of value investing.”
Berkshire doesn’t have to keep doubling the S&P’s performance to remain a superior investment. Even a 12 per cent total return over the next 10 years would produce a gain of 210 per cent, against 170 per cent for an S&P growing at its long-term historical average of around 10.5 per cent.
Mr. Abel’s performance will depend on how closely he adheres to Mr. Buffett’s philosophy. That means, among other things, not worrying too much about diversification. Apple comprised half of Berkshire’s total portfolio until just a few months ago, and as of March 31 still accounted for 23 per cent. A mere three companies – Apple, Bank of America and American Express – accounted for 47 per cent.
It also means ignoring investment fads and short-term results. Mr. Buffett famously sniffed at the dotcom mania of the 1990s, and today calls crypto-currencies “rat poison squared,” though there are indications that Berkshire is reconsidering. He often cautions investors not to worry about what the market will do in the short term. “I haven’t the faintest idea as to whether stocks will be higher or lower a month or a year from now,” he wrote during the crash of 2008, and said over the weekend that today’s tariff-induced volatility is “really nothing.” He has always counseled that in the long term it’s unwise to bet against the U.S. economy.
Mr. Abel told shareholders that he would be “more active” than Mr. Buffett in his involvement with Berkshire subsidiaries, which Mr. Buffett has generally left to their own devices. That should not be a problem. Mr. Abel’s questions “ensure you are thinking through directives and plans as a company,” Chris Kelly, chief executive of Berkshire subsidiary HomeServices of America, told Reuters. “You come away smarter from having a conversation with him.”
Mr. Abel seems aligned with Mr. Buffett as regards Berkshire’s enormous US$348-billion cash pile, calling it a “strategic asset” that positions the company to make acquisitions when conditions are right. “When we can deploy it, we’ll deploy it well,” he said.
“Greg is not somebody who is going to be as likely to create the kind of following in the press that I think Warren has had,” longtime Berkshire board member Ron Olson said on the eve of last year’s meeting. “On the other hand, I have every reason to believe that he will run the companies that we have the responsibility for in the same way that Warren ran them.”
Mr. Buffett, who wanted a relatively young successor who’ll have “a long run at the job,” said in 2023 that Mr. Abel “will be more successful than I have been, and if I said otherwise, my nose would grow.”
Berkshire investors have long worried what sort of hit the shares might take when Mr. Buffett departs, but if he picks successors as well as he picks stocks, they have little to worry about.
