We were a little surprised to see wide-moat rated Berkshire Hathaway (BRK.A) (BRK.B) be actually announce today that Greg Abel would be CEO Warren Buffett's successor once he departs the scene. The surprise, though, was in the timing of the announcement (which apparently was forced by a slip-up on Charlie Munger's part during the annual meeting this past weekend) as opposed to the announcement itself, both of which have had a positive impact on the stock, as it removes one of the major uncertainties hanging over the company.
We have long believed that Abel was the most likely successor to Buffett, given his age (59)--which satisfies Buffett's criterion that the company's next "CEO should be relatively young, so that he or she can have a long run in the job"--and his combination of both operational and capital allocation experience during his years at Berkshire Hathaway Energy. With the company's next CEO expected to fill the role of capital-allocator-in-chief, there were two strong candidates in line to take the top job (at least from the time they've spent with the company and their understanding of what Buffett wants the next capital-allocator-in-chief to do): Ajit Jain, who oversees all of Berkshire's insurance operations, and Abel, who has stewardship of the noninsurance businesses.
While we've always thought that Buffett and the board had some deference toward Jain; he's closer to 70 and has not shown much interest in following in Buffett's footsteps (given the pressures of being in that spot once Buffet departs). We've always thought that Berkshire would likely be better served longer term by having Jain to continue to oversee the insurance business (which is really where his passion lies) and have Abel--who will work closely with Jain, as well as Ted Weschler and Todd Combs--focus on properly allocating Berkshire's capital. Buffett did note that while Abel would succeed him if he departed tomorrow that Jain would succeed Abel if anything were to happen to him.
