Hopefully, the high cost of Berkshire Hathaway cost means that the majority of investors understand how the market functions. Even at its lowest, it still takes a tremendous amount of money to invest. Regardless, some people will panic. The fall will probably happen on the day that Buffett passes. Remember that the company lets anyone read its annual letter to investors, which contains copious investment advice. Regardless, his order shows that his commitment to the company extends after his death.
The plan formulated by Buffett and other stakeholders in Berkshire Hathaway include:. Will a change in leadership influence how the company invests in and helps direct companies? Even though there are unanswered questions, Buffett has been much more transparent than most billionaire investors. He has a board of trusted advisors who help him make investment decisions. Their strategies, however, may change without his oversight. When Buffett dies, Berkshire Hathaway will lose a brilliant investor.
No one knows precisely what will happen. Or is the moat shrinking? Great businesses are not all that common, and finding them is hard. Unusual factors combine to create the moats that shelter certain companies from some of the rigors of competition. Warren is superb at recognizing these franchises.
Warren installs strong managers in the companies Berkshire owns and tends to leave them pretty much alone. His basic proposition to managers is that to the degree that a company spins off cash, which good businesses do, the managers can trust Warren to invest it wisely.
Managers are expected to concentrate on the businesses they know well so that Warren is free to concentrate on what he does well: investing. My own reaction upon meeting Warren took me by surprise. Most people are quick to conclude that someone or something they encounter personally is exceptional.
This is just human nature. Everybody wants to know someone or something superlative. In fact, I was extremely skeptical when my mother suggested I take a day away from work to meet him on July 5, I mean, spend all day with a guy who just picks stocks? Are you kidding? Now, that caught my attention. Some of the people in the car were as skeptical as I was. My mom was really hard core that I come. When I arrived, Warren and I began talking about how the newspaper business was being changed by the arrival of retailers who did less advertising.
What are the growth businesses for IBM? What has changed for them? He asked good questions and told educational stories. On that first day, he introduced me to an intriguing analytic exercise that he does. His enthusiasm for the exercise was contagious. I stayed the whole day, and before he drove off with his friends, I even agreed to fly out to Nebraska to watch a football game with him. Understanding intrinsic value is as important for managers as it is for investors.
This principle may seem obvious, but we constantly see it violated. And, when misallocations occur, shareholders are hurt. For example, in contemplating business mergers and acquisitions, many managers tend to focus on whether the transaction is immediately dilutive or antidilutive to earnings per share or, at financial institutions, to per-share book value.
An emphasis of this sort carries great dangers… Imagine that a year-old first-year M. The M. But what could be sillier for the student than a deal of this kind? At Berkshire, we have rejected many merger and purchase opportunities that would have boosted current and near-term earnings but reduced per-share intrinsic value. That happens because the acquirer typically gives up more intrinsic value than it receives.
Instead of selling off Buffett's stock in one big chunk immediately after his death, the executors of Buffett's estate will instead take advantage of the provision allowing them to convert Class A shares to Class B shares , with each A share turning into 1, B shares. Distributions of B shares will then go to the foundations that Buffett has chosen to endow in his will. Eventually, any estate proceedings will close, and remaining Berkshire shares will get put into trust.
Thereafter, the trustees of those trusts will follow the same game plan, converting shares periodically for distribution to charitable foundations. Buffett estimates that it will take 12 to 15 years for his stake in Berkshire to get distributed in this manner. That should spread out any impact on the market from having a flood of shares suddenly available for sale. From the shareholder perspective, Buffett still has confidence that holding Berkshire stock after his death will likely work out well.
In his words, "I myself feel comfortable that Berkshire shares will provide a safe and rewarding investment during the disposal period. Of course, he acknowledges the possibility that adverse conditions could prove him wrong, but he still sees a high likelihood of success from his strategy, compared to what the typical estate planning situation would entail. Warren Buffett 's frankness about his eventual death is just another example of how the Berkshire CEO has been able to communicate directly and effectively about issues that few other top corporate executives would ever discuss publicly.
It's hard to envision Berkshire without Buffett, but the Omaha native is comfortable that his legacy will endure long into the future. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception. Cost basis and return based on previous market day close. Investing Best Accounts.
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