Buffett Seeks Successor: Must Be Independent, Avoid Risk
Wanted: Savvy young money manager to train with an investment god. Will be responsible for managing some $40 billion in cash. Must be able to think independently and recognize and avoid serious risks. Emotional stability and a keen understanding of human and institutional behavior necessary.
Warren Buffett advertised his search for a successor in his annual shareholder letter released Thursday.
“Why don’t we do an American Idol version of searching for a portfolio manager?" Harvey Eisen, chairman of Bedford Oak Partners told CNBC’s Liz Claman on “Morning Call.” “There’s nobody that has half a brain in this business that would not jump at the opportunity to go to work with, for Warren Buffet.”
To replace Buffett, Berkshire plans to split his job into two parts — chief executive officer and chief investment officer. Berkshire has three internal candidates for CEO, and the company’s board approved a plan in October to hire one or more candidates for CIO, so Berkshire will be ready when 76-year-old “Oracle of Omaha” can no longer work.
More to Investing
“It’s not hard, of course, to find smart people, among them individuals who have impressive investment records,” Buffett wrote in his letter. “But there is far more to successful long-term investing than brains and performance that has recently been good.”
Buffett said the internal candidates for CIO may be too close to his own age to do it for very long, including front-runner Lou Simpson, Geico’s portfolio manager, who is 70.
Ajit Jain, who runs Berkshire's reinsurance business, seems better poised for the CEO job.
“He is probably the best insurance executive in the world but not really an investment person,” said David Winters, CEO of Wintergreen Advisers, also a guest on “Morning Call.”
Billionaire financier Eddie Lampert, who runs his own $9 billion private fund, ESL Investments, has been singled out as a potential candidate.
"Understand Buffett's Philosophy"
“You have to have patience and discipline, you have to understand Buffet’s philosophy and you have to believe what he said in the annual report, that they are really geared to making their culture continue,” Eisen said.
Buffett’s letter is widely read by the investment world for its folksy, no-nonsense tone and invaluable insight from what many consider “the greatest investor of all time.”
“This is a continuation of the greatest textbook that has ever been written,” Eisen said.
Buffett outlined his major investments in 17 companies, including five new ones. Those are Conoco Philips, Johnson & Johnson, Tesco, U.S. Bancorp and POSCO, a South Korean steel company.
“I would take that list of 17 companies, do a fundamental analysis and see where the price of the stock is today and what it’s done over the last three or six months.” Eisen said. “Warren Buffet has done the analysis for you. You should look at those and you should buy that portfolio.”