Berkshire Soars to All-Time High on Succession News
- By Holly LaFon
Markets really liked the certainty of knowing Warren Buffett (Trades, Portfolio)"s potential successor picks.
Shares of Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) rose about 1.15% on Monday morning to all-time highs of $205.35 per class-B share and $308,000 per class-A share. The S&P 500 index declined roughly 0.087%.
The gains came as Berkshire announced it had added two new directors, Greg Abel and Ajit Jain, to its board, expanding the number of members to 14 from 12. Abel will act as vice chairman of non-insurance business operations and Jain will service as vice chairman of insurance operations.
"But it will be valuable to anybody that succeeds me to have had more experience in the overall management of a large area," Buffett said in a Wednesday morning interview on CNBC.
Both of the men received high praise from Munger in the same interview.
"It"s a very good idea. All of Berkshire shareholders should be very happy about it," he said. "You could hardly find two more qualified people on earth to be promoted to more recognition and so forth. And Warren is actually going to devolve a little more power in some directions, and these people do some things better than Warren does. It"s a huge plus for Berkshire to do it."
Berkshire"s chairman and CEO Warren Buffett (Trades, Portfolio) and vice chairman Charlie Munger (Trades, Portfolio) will keep their current positions and continue to make investment decisions, according to a press release.
Berkshire has also become more expensive. Its price-earnings ratio reached 26.9 on Wednesday, the highest since late 2009. Its price-sales ratio of 2.1 is the highest since 2004.
In the third quarter, Berkshire shares had sunk on weaker earnings. The company had announced operating earnings of $3.44 billion, including $1.4 billion in operating losses on insurance underwriting, versus $4.5 billion the previous year.
Over the past five years, Berkshire had annual growth rates of 9.2% for revenue, 14.1% for EBITDA and 11.3% for book value. The insurance conglomerate has roughly $100 billion in cash on its balance sheet.
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This article first appeared on GuruFocus.
