Berkshire: We’ll be OK Investors say company will survive, even without Buffett

Berkshire Hathaway'S Chairman Warren Buffett talks to reporters Saturday, May 3, 2003, at the company's shareholders meeting in Omaha, Neb. (AP Photo/Dave Weaver) ¬ ¬ Published Quote 3/12/05; ""All they had to do was piggyback corporate America in a diversified, low-expense way. An index fund that they never touched would have done the job. Instead, many investors have had experiences ranging from mediocre to disastrous."" ¬ Excerpt from annual letter to shareholders

OMAHA, Neb. — Berkshire Hathaway shareholders are making their annual pilgrimage here this weekend, and this year they have to confront an uncomfortable truth: Warren Buffett, Berkshire’s CEO and the greatest celebrity in investing, can’t go on forever.

Investors would rather not imagine life without the Oracle of Omaha, who is 81 and said last month that he had been diagnosed with prostate cancer. And he has no plans to leave the post soon.

When the day comes, people who have studied the company say, Berkshire without Buffett will probably look a lot like Berkshire with Buffett.

Berkshire, which owns roughly 80 subsidiaries that range from a railroad to an upscale kitchen products company, is already decentralized: Of its 270,000 employees, just 24 work at Omaha headquarters.

The conglomerate has a succession plan in place. Berkshire will split Buffett’s job into three when he’s gone, and the board has chosen the next CEO – although Buffett has said that person doesn’t know it yet.

And at least in the short term after Buffett, not unlike Apple in these first months after the death of Steve Jobs, there should be strong institutional pressure to keep doing things the way Buffett did them, Berkshire watchers say.

“Nobody is going to want to mess with what Warren Buffett built,” says Jeff Matthews, a Berkshire shareholder and author of “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett.”

To be sure, a Berkshire without Buffett would lose the sheen of celebrity. More than 30,000 shareholders are expected to be in Omaha for the annual meeting and related events that began Friday.

Buffett and Berkshire’s vice chairman, Charlie Munger, who is 88, will spend more than five hours answering questions today — many of them doubtless about what happens to Berkshire when Buffett is gone.

Berkshire’s Class A stock remains the most expensive U.S. stock. One share traded for about $122,000 Thursday, near its 52-week high of a little more than $123,500. The Class B shares sell for a more affordable price, about $81.

Buffett says the growth in the stock’s book value – the company’s assets minus liabilities – has outpaced the Standard & Poor’s 500 index in all but eight years since 1965 for a compounded annual gain of almost 20 percent.

Buffett’s cancer doesn’t appear a threat to the billionaire’s life because doctors caught it early, and Buffett plans to undergo radiation treatments this summer.

But even before last month’s diagnosis, Buffett acknowledged that his age limits how many more years he has to lead Berkshire. And not everyone is confident about the company after those years.

Meyer Shields, a stock analyst for the brokerage Stifel Nicolaus, says that Buffett is deeply intertwined with the company, making it difficult to assess the importance of his role.

“It’s hard to know where Warren Buffett ends and Berkshire begins,” Shields says.

In addition to a smaller annual meeting crowd in the post-Buffett era, Shields says Berkshire Hathaway and its next chief executive will have a lower cultural profile.