Tuesday, 28 February 2012

The Next "Warren"?

buffett
The shareholders of Berkshire Hathaway Inc. might want to reevaluate the stocks in their hand after last Saturday's annual letter. The 81-year-old CEO announced not only his achievements and mistakes during last fiscal year, but also that an unnamed successor of the company has been selected. Although he promised his health condition, people still kept raising question about the identity of the successor and if the company would prosper on the next generation as amazingly as it did in Mr. Buffett's hand. Belief used to be that Warren Buffett's son, Howard, is going to take his position yet the new declaration made this issue more mysterious.

From personal perspective, I am curious about the future life of Berkshire Hathaway as well. As all known, Warren Buffett is always a firm champion of value investment theory created by his professor, Benjamin Graham. He chose companies with potentially large profit margin and undervalued prices to invest such as Washington Post and Coca Cola. So here comes the problem. If his heir carries on his investment idea, is it still possible to find such undervalued stocks today with large capacity? Time has changed and investors' rationale has developed. It's almost impossible to redo Mr.Buffett's miracle on current market. If his successor does not agree to Buffett's value, can he maintain the size and yearly profit of Berkshire? As I said, time has changed. Berkshire is no longer one of the many investing companies as it was forty years ago. It holds rather huge share of the market which means it's really hard to earn a huge amount besides maintaining its regular dividend. If the new CEO holds different opinion, can he protect this huge monster as Buffett did?

Investors will never stop questioning. While Mr.Buffett refused to comment on these issues, whoever will take the position still have a long way to go.

Oscar Zhang

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