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Published: Sunday, 2/26/2012

Buffett picks, but does not name, his successor

Berkshire Hathaway leader has no plans to step away soon


OMAHA -- Investor Warren Buffett, in his annual letter to Berkshire Hathaway shareholders on Saturday, said for the first time that he has selected a replacement.

But Mr. Buffett, 81, did not name the candidate and emphasized that he and his business partner, 88-year-old Charlie Munger, were sticking around.

"Do not, however, infer from this discussion that Charlie and I are going anywhere; we continue to be in excellent health, and we love what we do," wrote Mr. Buffett, who has built Berkshire into one of America's largest companies.

By signaling a succession plan, Mr. Buffett hopes to reassure investors who have expressed concern over Berkshire's future leadership. Berkshire's share performance has lagged the broader stock market over the last two years, and Wall Street analysts partly blame the uncertainty surrounding a new chief executive officer.

Beyond succession issues, the 22-page letter delved into the performance of Berkshire's vast holdings, providing insights into the country's business prospects.

"In short, when you look at Berkshire, you are looking across corporate America," wrote Mr. Buffett, whose net worth Forbes magazine places at about $50 billion.

With stock worth about $200 billion, Berkshire ranks among the top 10 most valuable companies in the United States.

Berkshire reported net income last year of about $10.3 billion, which was off 21 percent from 2010. The company's book value, or net worth -- Mr. Buffett's preferred yardstick for performance -- increased 4.6 percent, outpacing the broader stock market's 2.1 percent growth.

Among the assets that dragged on Berkshire's performance were its holdings in the housing sector, which include the home builder Clayton Homes, the carpet-maker Shaw, and Acme Brick.

"Last year, I told you that 'a housing recovery will probably begin within a year or so,' " wrote Mr. Buffett. "I was dead wrong."

"Wise monetary and fiscal policies play an important role in tempering recessions, but these tools don't create households nor eliminate excess housing units," Mr. Buffett added. "Fortunately, demographics and our market system will restore the needed balance."

Only then, Mr. Buffett said, will home building pick up and unemployment substantially drop.

Even though the successor wasn't named, stockbroker and author Andy Kilpatrick said the way Mr. Buffett described the person makes him more confident that the leading candidate is Ajit Jain, who runs Berkshire's reinsurance division.

"The more I think about it, the more I think we have a successor," said Mr. Kilpatrick, who wrote Of Permanent Value: The Story of Warren Buffett.

Besides Mr. Jain, the other Berkshire managers believed to be possible successors as CEO are Greg Abel, president and CEO of MidAmerican; Tony Nicely, chief executive of Geico; and Matt Rose, Burlington Northern Santa Fe CEO.

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