Succession planning is not often discussed or even included in an agenda for many firms. For example, when the Micron Technologies (MU) chief died earlier this year from a plane accident, there was no mock succession plan in place. But other companies are more cautious when leadership is strongly tied into stock price. An example of this is Ford’s (F) CEO, Alan Mulally, who is running the company so well that the company set succession plans, although he said he will stay through 2014.
In the case of Warren Buffett, Berkshire Hathaway (BRK-B) appointed Todd Combs and Ted Weschler to manage $4 billion each, out of the $86.2 billion portfolio. Top on the list of running the company is overseeing takeovers for growth.
Weschler wanted to be a millionaire since middle school. He has a degree at University of Pennsylvania’s Wharton School, and has worked from management to private equity since. His private equity firm held just 9 companies.
What are some characteristics that Weschler has that investors could have? Weschler spends his time reading 10-K and 10-Q filings. He also made his big gains from investing in chemical maker W.R. Grace after it went bankrupt in 2001. He was directly involved in negotiating a settlement in 2008, after workers claimed its products caused cancer and other diseases. Since the bankruptcy, its shares rose 40-fold.
Investors holding Berkshire should expect these things:
1. A succession plan is in place for Berkshire. When Buffett retires, the company will be run like “business as usual.”
2. The investment principles for Berkshire will not change: Berkshire will still look for undervalued securities.
3. Growth at Berkshire will still be driven largely from takeovers.
4. A dip in shares of Berkshire would be temporary. If shares were to drop, it would be a good time to look at the company again.
5. Share buyback or acquisitions will be made from the current $42 billion in cash, even before Buffett retires.
Business Section: Investing Ideas
The top 5 holdings at Berkshire represent a starting point for investing ideas. The top holdings as of June 30 2012 were:
1. The Coca-Cola Company (KO, Earnings, Analysts, Financials): Distributes, and markets nonalcoholic beverages worldwide. Market cap at $161.82B, most recent closing price at $36.08. 21.04% of portfolio.
2. Wells Fargo & Company (WFC, Earnings, Analysts, Financials): Provides retail, commercial, and corporate banking services primarily in the United States. Market cap at $170.4B, most recent closing price at $32.37. 18.49% of portfolio
3. International Business Machines Corp. (IBM, Earnings, Analysts, Financials): Provides information technology (IT) products and services worldwide. Market cap at $213.84B, most recent closing price at $189.25. 17.53% of holdings
4. American Express Company (AXP, Earnings, Analysts, Financials): Provides charge and credit payment card products, and travel-related services worldwide. Market cap at $62.13B, most recent closing price at $55.52. 11.87% of holdings.
5. Procter & Gamble Co. (PG, Earnings, Analysts, Financials): Provides consumer packaged goods in the United States and internationally. Market cap at $183.41B, most recent closing price at $67.08. 4.91% of holdings.
Companies mentioned in this article:
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Disclosure: Long position on Ford.
Analyze These Ideas: Getting Started
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Dig Deeper: Access Company Snapshots, Charts, Filings
- The Coca-Cola Company (KO, Chart, Download SEC Filings)
- Wells Fargo & Company (WFC, Chart, Download SEC Filings)
- International Business Machines Corp. (IBM, Chart, Download SEC Filings)
- American Express Company (AXP, Chart, Download SEC Filings)
- Procter & Gamble Co. (PG, Chart, Download SEC Filings)
- Ford Motor Co. (F, Chart, Download SEC Filings)
- Micron Technology Inc. (MU, Chart, Download SEC Filings)
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