A veteran analyst says he was stunned by Warren Buffett’s decision to step down as Berkshire Hathaway CEO this year — and told Business Insider what he expects to change under his successor, Greg Abel.
“I was shocked,” Meyer Shields, a managing director at Keefe, Bruyette & Woods who’s been covering Berkshire for more than 15 years, said in an interview.
Shields didn’t see Buffett’s resignation coming because the famed investor had “frequently talked” about wanting to stay in the top job as long as possible. “This has been his life more than anything else,” Shields added.
Buffett, who turns 95 next week, had just showcased during the hourslong Q&A at Berkshire’s annual meeting in May that he still had the “mental acuity” and familiarity with Berkshire’s sprawling operations to remain in charge, Shields said.
The fact that Buffett made the announcement signals it was “voluntary” and “his decision,” Shields continued. The legendary stock picker may have opted to step down because he wanted to leave on his terms and with his legacy intact, he added.
Buffett has “always been very good at not overplaying his hand,” Shields said.
What might change under Abel — and what might not
Berkshire has “so much cash now” — a record $344 billion as of June 30 — that it’s high time it returns some to shareholders via a dividend, Shields said. The conglomerate is “hoarding” the huge sum, he continued, and it’s “not doing anybody any good for that to just be sitting there.”
Buffett’s company has only paid one dividend during his 60-year tenure. He once joked he must have been in the bathroom when the board approved it.
Buffett has said he prefers to let shareholders decide how much income they want to draw out of the company, and doesn’t want to pay them something that is taxed.
Shields said a dividend is “quite likely” under Abel. He also suggested there could be a spike in employee turnover among staff who might not feel the same commitment toward the new boss.
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He predicted a “little bit more skepticism” from Wall Street and the financial media when the company is no longer led by someone so revered he’s dubbed “The Oracle of Omaha.”
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Unlike other Berkshire gurus, Shields said he doesn’t expect Abel to be more directly involved in managing the subsidiaries than Buffett, who structured Berkshire as a web of decentralized, autonomous businesses to free him to focus on allocating capital inside and outside the company.
Shields said that greater involvement from Abel could “almost change the perception” of Berkshire as a hands-off acquirer, potentially deterring business owners from selling their companies to the conglomerate.
“I don’t think he’s going to rush in to make changes,” Shields said, especially as Buffett intends to stay on as chairman.
Shields also said Berkshire should “improve its disclosure” as its financial filings are “unnecessarily difficult to understand” and light on detail relative to its insurance peers.
It could face more pressure to conform to industry norms without the “halo of Buffett at the helm,” he added.
He added that many people own Berkshire stock because of Buffett, and more detailed disclosures could give them other reasons to continue owning it once he’s gone.
Berkshire Hathaway didn’t immediately respond to a request for comment from Business Insider.
