Will Warren Buffett Return As Berkshire Hathaway’s CEO?

Warren Buffett has a great deal to worry about at Berkshire Hathaway (NYSE: BRK-B | BRK-B Price Prediction). Among them is that his net worth has dropped by $5 billion this year to $146 billion, placing him behind Steve Ballmer and Jim Walton, both at $147 billion. He is one of the few people on the Bloomberg Billionaires list to watch who saw that drop. That is not much of a problem, because he has been so healthy for so long.

Much more importantly, Berkshire Hathaway’s stock performance this year is down 2% while the market is up 8%. Over the last year, the stock is off 1% while the market is up 23%.

The knock on Buffett’s replacement is that it completely missed the tech stock runup. AMD (NASDAQ: AMD), for example, is up 117%. New CEO Greg Abel’s claim to fame is that he spent $8.5 billion on homebuilder Taylor Morrison. The real estate market in the US is not terribly healthy. (Berkshire did invest $10 billion in Alphabet’s plans to expand its AI infrastructure buildout.)

One of the things Wall St. hoped was that Abel would deploy some of Berkshire’s $400 billion in cash. He has barely spent a dime in comparison to the whole.

Although it is rare for new CEOs to lose their jobs quickly, it happens. It was the case at Disney (NYSE: DIS), where CEO Bob Iger handed the reins to Bob Chapek, only to take them back again. Laxman Narasimhan made it 16 months at Starbucks (NASDAQ: SBUX). Hein Schumacher made it 17 months at Unilever. These are examples of huge companies whose CEOs did not last long. Abel may have another year to go. Or maybe not. He probably has that much time.

Berkshire’s entire reputation rested on a single individual, unlike in other “short-term” CEO replacements. Buffett still comes to his office at Berkshire Hathaway’s headquarters five times a week. So, he is around.

What does Abel have to do to gain Wall St.’s confidence? He has to invest in companies with outsized prospects. This could even be huge companies that had held their own in the market, like Ford and Walmart. He could at least make a modest reinvestment in Apple, which is up 13% this year.

Finally, unless Berkshire is hiding anything, Buffett is in good health.

When is enough enough, according to the record of CEOs losing their jobs because of underperformance based on investment? A year on the short side. Abel will need to change his appetite away from mundane investments, at least partly and visibly. Otherwise, unless the current tech collapse lasts longer than a few days, the questions about his decisions will grow. Buffett is still in the house.