Warren Buffet Is Hiring – Young CIO

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Mar 02 2007
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The main difference between the longevity of Eastern and Western managed companies is in the succession plan. Most easterners passed on their business legacy to their immediate family members (normally sons) because they believe their decades-built empire should be kept within their own family members as outsiders are considered non-trustworthy. This trend was set thousands of years ago when the China’s emperor will pass his throne down to his eldest or most capable son – the concept of dynasty. “Wealth will not pass beyond three generations,” warns a Chinese proverb in relationship to how long a business empire built will lasts.

Westerners meanwhile learnt that there’s nothing wrong to pass on your business empire to people other than your immediate family members as capability of a person supersedes every factors if you wish to see your built-empire survives through decades or even centuries of challenges. That’s why you still can see Ford Motor (NYSE: F, stock), Coca-Cola Company (NYSE: KO, stock) and Alcoa Inc. (NYSE: AA, stock) around.

Legendary investor Warren Buffett is the greatest investor of all. Almost all investors investing in stocks would know who this great Oracle is. If you do not know who he is, you shouldn’t start investing your hard-earned money yet. He is so famous that his flagship, Berkshire Hathaway Inc. (NYSE: BRK-A) actually commands a huge premium on the stock price. Should he dies today, the stock of Berkshire Hathaway Inc. will tumble like a rock – most analysts believe. As he approached the age of 70 (Warren is 76 now), everyone was started to ask the billion-dollar question – who will be his successor? His sons neither have the magical touch nor half the investing talent he has.

Known as the Oracle of Omaha, Buffett has transformed Berkshire since 1965 from a failing textile company into a $164 billion conglomerate by buying out-of-favor companies with strong management and businesses, and investing in stocks.

Yesterday, Mar-1-2007, in his annual shareholder letter Warren reveals his intention to hire a young investment manager to succeed him. Berkshire will create two top positions – chief executive officer (CEO) and chief investment officer (CIO). It was hope that the new candidate for the CIO position will be having some mandatory requirements besides being young.

Last year Buffett said Berkshire’s board had three outstanding internal candidates for chief executive, and the board knows “who should take over if I should die tonight.” Each of those candidates is significantly younger then the 76-year-old Buffett.

This year, the “Oracle of Omaha” said Berkshire is not well-prepared for a successor on the investment side of the business because those who might replace him on the investment side are too close to his own age. The best candidate so far for is Lou Simpson who manages Geico’s investment portfolio but Lou is already 70.

Some of the criteria the young CIO should possess include:

  • have impressive investment records
  • able to think independently
  • recognize and avoid serious risks
  • emotional stable
  • keen understanding of human and institutional behavior
  • able to put $38.3 billion cash to work
  • as young as possible in relative to Warren’s age of 76

During the fourth quarter, which ended Dec. 31, Berkshire made $3.58 billion, or $2,323 per share. That is down 30.2 percent from the year-ago period when Berkshire made $5.13 billion, or $3,330 per share. Berkshire’s Class A shares (BRK.A) are the most expensive U.S. stock, and they have traded above $100,000 a share since last fall. Berkshire’s Class A shares ended Thursday up $410 at $106,600 and its Class B shares (BRK.B) rose $31 to $3,554.

Buffett said Berkshire gained $16.9 billion in net worth during 2006, which represents an 18.4 percent jump in the per-share book value of the company. That’s better than the S&P 500’s 15.8 percent increase in value during 2006.

Berkshire owns more than 60 companies, including insurance, clothing, furniture, jewelry and candy companies, restaurants, natural gas and corporate jet firms and has major investments in such companies as Coca-Cola Co. (Warren’s favorite drink), Anheuser-Busch Companies Inc. (NYSE: BUD, stock), American Express Co (NYSE: AXP, stock), Dairy Queen ice cream, Fruit of the Loom underwear and Wells Fargo & Co (NYSE: WFC, stock).

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