No. of Recommendations: 29
I would argue that the current situation could indeed be different. We have a new CEO. Will he be more aggressive with acquisitions? Less aggressive?
Good question.
I'll argue that until the investment opportunities change, nothing significant will change in the outlook for BRK.
We're already at the size where it takes a really huge stock buy or acquisition to move the needle for BRK. And more than one.
And, we're already at the market where such opportunities don't now exist - and won't until we have a major, really major, market correction. 300+ billion is an awfully lot of money to deploy. $10 billion size chunks won't move the needle.
Plus, we're bound by a board decision, driven by Buffett, that we can't do buybacks until the stock is below a conservatively estimated IV. It isn't now, and not particularly close.
Also, the Buffett family and most long term shareholders don't want dividends because of the tax consequences.
None of the foregoing have changed. We're waiting, Buffett very patiently, for the major stock market correction.
The new CEO will also face some serious negotiations with Buffett, and really the Buffett family after he passes. What is the Berkshire culture really? Can he become more aggressive on competing for acquisitions - or is he bound to either the "no interest" position on competitive auctions or "one offer and done" on other opportunities? It's clear that Berkshire owned companies weren't held to aggressive cost controls before management moved to Greg and Ajit. See Gen Re, Geico, BNSF, etc. for examples - and a general consensus that Greg has tightened performance standards. How far can he go before the violates the "limited oversight to abdication" that Buffett has practiced? What will be the management turnover if he decides that reducing costs will have to be a major strategy if BRK is to grow profits? And consolidation of the existing management structure?
(An aside. I'm not arguing that Buffett did wrong in his management style. His time was much better spent on investing than managing businesses. I do argue that those priorities are different in current markets. Even if markets do collapse, and Buffett gets a last chance to deploy a lot of capital, the size issue will still remain. And tighter management will be needed going forward.)
So, maybe the current situation is really different than the past. But it's not because we're changing CEO's. It's because the investment opportunities at BRK's size are driving change.
Buffett's pulling back may reflect that. Let's see how his heirs recognize that.
