Opinion Warren Buffett, Oracle of Omaha, steps away. His successor has a tough job

Warren Buffett, the renowned investor, is “going quiet”. He will no longer write Berkshire Hathaway’s annual report or speak at its annual meetings — rituals that go back several decades. Buffett’s phenomenal success, and almost unparallelled track record, had led to his letters to shareholders and Berkshire’s annual meetings — where he and his longtime friend, Charlie Munger, would hold forth on a range of issues, from companies to markets and the economy — being widely followed by investors across the world. His withdrawal now — Greg Abel is set to take over as CEO — marks the end of an era.

Buffett’s investment philosophy was shaped by men such as Ben Graham, widely considered the father of value investing. An advocate of the buy-and-hold philosophy, Buffett has held stakes in companies like Coca-Cola and American Express. He also has significant holdings in global tech major Apple. In an era when companies and investors tend to be guided more by quarterly results, Buffet has continued to stay with his approach: Start early, stay invested. Compounding works. It was in 1986, when he turned 56, that his net worth reached $1 billion. Fast forward almost four decades, and it is currently pegged at around $150 billion.

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Buffett has never been afraid to speak his mind. He once famously likened derivatives to weapons of mass destruction —a view that resonated widely during the financial crisis of 2008. Some of his methods to gauge the market cycle — for instance, the total stock market capitalisation to GDP ratio — have served as useful tools to understand market valuation. As the Oracle of Omaha departs, his successor has a tough job. Berkshire currently has cash reserves in excess of $350 billion. Abel will need to deploy this war chest carefully and tactically, ensuring that the risk-reward profile does not change much. Berkshire shareholders have at times cut Buffett some slack —for instance, returns have trailed the benchmark index this year. Whether they show the same patience and confidence in Abel is to be seen.