Berkshire CEO Abel to lay out thinking for a post-Buffett world

By Jonathan Stempel

Feb 26 (Reuters) - Berkshire Hathaway's BRKa.N new Chief Executive Greg Abel faces numerous challenges as the successor to famed billionaire Warren Buffett.

This Saturday, Wall Street will see how he tackled one unique to Berkshire: the highly anticipated annual letter to shareholders.

Buffett, 95, stepped down at year-end, concluding six decades in which he transformed a failing textile company into a more than $1 trillion conglomerate that owns several insurers, the BNSF railroad, and dozens of energy, industrial and retail businesses.

While still chairman, Buffett said in November he would be "going quiet" as Abel took charge.

Buffett is a tough act to follow, and the 63-year-old Abel won't be a carbon copy.

Whether fielding questions alongside Buffett at annual meetings in Omaha, Nebraska, or in a 2022 letter about environmental sustainability that Buffett asked him to write, Abel has focused more on the nuts and bolts of Berkshire's businesses when addressing investors.

His letter may do the same, perhaps less lyrically than Buffett's eagerly awaited annual address. It is a chance to show how Berkshire will evolve - and perhaps even whittle down its $381.7 billion pile of cash.

"Warren Buffett was the Mark Twain of shareholder letter writers," said Evan Pondel, who founded investor relations firm Triunfo Partners and teaches at the University of Southern California's Annenberg School for Communication and Journalism. "Abel hasn't been an easy person to get to know at Berkshire. The annual letter is his opportunity to establish his voice, tone and strategy."

Abel joined Berkshire in 2000, and for the last eight years was a vice chairman overseeing dozens of non-insurance businesses.

He is widely regarded as having a deep understanding of Berkshire and commitment to its culture.

"Management credibility has been a big part of Berkshire's strategy," said Greg Miller, a professor at the University of Michigan's Ross School of Business specializing in financial communications. "Buffett's name brought credibility to what the company does and the choices it makes. Abel needs to step in and continue that."

SHARES HAVE LAGGED

Berkshire's fourth-quarter and annual results will accompany Abel's letter. Operating profit for all of 2025 could approach the record $47.44 billion set a year earlier.

Yet Berkshire's stock price has dropped 8% since last May 3, when Buffett announced his plans to step down, while the Standard & Poor's 500 .SPX has risen 22%.

Analysts have long considered the cash buildup a drag. Berkshire has been a net seller of stocks for 12 straight quarters, and conducted no share buybacks for five straight quarters. Its stock trades at approximately 1.5 times book value.

Berkshire did not immediately respond to requests for comment.

No other CEO's words - including JPMorgan Chase's JPM.N Jamie Dimon and BlackRock's BLK.N Larry Fink - were as parsed as Buffett's. Each of his letters written since 1978 lives on the company's website.

Buffett often adopted a folksy tone. In 2008, he famously wrote about the financial excesses that led to the collapse in the U.S. housing market: "You only learn who has been swimming naked when the tide goes out."

Still, even if Abel writes mainly about Berkshire, he could turn his gaze elsewhere.

"Buffett's letters were not just about what Berkshire did, but how Buffett saw the world. People will want to know how Greg Abel sees the world," Miller said. "He has to walk a fine line between continuity and establishing himself."

BERKSHIRE FACES UNANSWERED QUESTIONS

Abel's letter could address other unanswered questions.

They include how long Vice Chairman Ajit Jain, 74, whom Buffett called a "unique" talent, will stay on after decades leading Berkshire's insurance operations.

Berkshire also hasn't named a chief investment officer to replace Buffett, who ran most of its approximately $300 billion equity portfolio. Ted Weschler has helped manage the portfolio and could fill that role, as could Abel, or both.

Options to reduce cash, meanwhile, include resuming stock repurchases or paying Berkshire's first dividend since 1967.

"Greg will be opportunistic - that’s a hallmark of the Berkshire way," said Steven Check, a longtime Berkshire investor at Check Capital Management in Costa Mesa, California.

Pondel said Abel should use the letter to demonstrate adherence to Buffett's values, an approach to long-term shareholder value, and an investment thesis he can execute over the next decade.

That means being more than just Berkshire's new on-field general.

"Following Buffett is like taking the football from Tom Brady," said Macrae Sykes, portfolio manager at Gabelli Funds in Rye, New York, referring to the retired football quarterback. "As long as Abel can communicate well, and give clear and transparent business feedback, he will do well in building shareholder confidence."