{"id":5291,"date":"2023-05-07T07:02:15","date_gmt":"2023-05-07T11:02:15","guid":{"rendered":"https:\/\/ifintechworld.com\/markets\/3-berkshire-hathaway-ceos-on-buffett-abel-and-managing-for-the-long-term\/"},"modified":"2023-05-07T07:02:15","modified_gmt":"2023-05-07T11:02:15","slug":"3-berkshire-hathaway-ceos-on-buffett-abel-and-managing-for-the-long-term","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=5291","title":{"rendered":"3 Berkshire Hathaway CEOs on Buffett, Abel, and Managing for the Long Term"},"content":{"rendered":"
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OMAHA, Neb.\u2014Warren Buffett\u2019s
\n Berkshire Hathaway
\n conglomerate includes dozens of wholly owned companies acquired over the past six decades, plus a sizable equity portfolio. From the smallest subsidiary to leading businesses like Geico, the BNSF railway, or
\n Berkshire Hathaway
\n energy, all exhibit Buffett\u2019s preferred investment characteristics.\u00a0<\/p>\n

Those include durable competitive advantages\u2014what Buffett calls a \u201cmoat\u201d\u2014consistent profits, the ability to grow at attractive rates, and quality management teams. He likes to buy businesses that can thrive forever with minimal input and ongoing investment.<\/p>\n

\n

See\u2019s Candies was one of Buffett\u2019s earlier acquisitions at Berkshire (ticker: BRK.A, BRK.B), in 1972, for a purchase price of $25 million. In Buffett\u2019s 2014 shareholder letter, he said that See\u2019s had generated $1.9 billion in pre-tax earnings for Berkshire since then, for an added investment of only $40 million.<\/p>\n

It continues to be a capital-light grower, says CEO Pat Egan at the See\u2019s exhibit on the floor of Omaha, Neb.\u2019s CHI Health Center, the venue for the 2023 Berkshire Hathaway annual shareholders\u2019 meeting. Business was brisk\u2014Egan said See\u2019s was on track to surpass the 11 tons of chocolates and peanut brittle sold at the 2022 confab.\u00a0<\/p>\n

See\u2019s fulfills another investing maxim that Buffett espouses: Buy businesses that you know and understand. (\u201cWhat else but candy from See\u2019s could account for Charlie and me making it to 99 and 92?\u201d he wrote in his 2022 letter.) For Egan, it all comes back to the brand and See\u2019s history, which stretches back to its founding in 1921.<\/p>\n

\u201cWe make fantastic candy, we stay true to our customers\u2019 expectations,\u201d Egan tells Barron\u2019s<\/em>. \u201cWe still use Mary [See\u2019s] recipes for peanut brittle, for toffee, for walnut pieces, and others\u2014and we never add preservatives.\u201d<\/p>\n

See\u2019s is vertically integrated, from its 253 bricks-and-mortar stocks to the company\u2019s factories producing 92% of the product it sells. Overall costs are up some 30% over the past year, with input prices for sugar and milk more than doubling, Egan says. That\u2019s a painful price increase, but See\u2019s strong brand leaves ample profit margin to absorb some higher expenses\u2014while Berkshire\u2019s long-term focus means See\u2019s doesn\u2019t need to worry about this or that quarter\u2019s result.<\/p>\n

\u201cIt\u2019s obviously better if you own See\u2019s Candies than if you own a no-name candy company,\u201d Buffett said at the shareholders\u2019 meeting on Saturday, noting its pricing power. \u201cWhen people buy it as a gift\u2026If you say \u2018I got a wonderful deal on this candy,\u2019 it kills the moment.\u201d<\/p>\n

That focus on the brand is evident at other Berkshire subsidiaries. Brooks Sports, which makes and sells running shoes and related apparel, is focused on the running community and being the answer from \u201chead to toe in running,\u201d CEO Jim Weber tells Barron\u2019s<\/em>. Supply chain issues during the Covid-19 pandemic kept the company from meeting as much customer demand as possible, with things finally returning to normal in recent months. Despite it all, sales hit a record high around $1.3 billion in 2022, and should grow in the high-single digits in 2023, per Weber.<\/p>\n

Brooks sells via bricks-and-mortar and online retail partners and from its own direct-to-consumer website. It\u2019s another capital-light business with a strong brand, steady growth, and consistent profits. Brooks is the best-selling running shoe in the premium segment of the market.<\/p>\n

\u201cWe just work on managing our business as well as we can execute it, and we know Berkshire will be there standing behind us,\u201d Weber says.<\/p>\n

Ice cream and burger chain Dairy Queen has been under the Berkshire umbrella since 1998, when Buffett acquired the business for around $585 million. It has since grown to a record $5.7 billion in sales in 2022 and more than 7,000 locations in over 20 countries.\u00a0<\/p>\n

The company operates under a franchise model, collecting a percentage of gross sales from its restaurants. Some 300 new Dairy Queen restaurants opened last year, and CEO Troy Bader says the company is on track to add more than that in 2023\u2014with the largest share opening in China.<\/p>\n

Berkshire\u2019s backing helped DQ get through several tumultuous years for the restaurant business during and after the Covid-19 pandemic, Bader says, as the company was forced to close locations, then doubled down on drive-thrus, then dealt with shortages of labor and supply chain issues as the world reopened.<\/p>\n

More recently, franchisees have been lifting their prices to pass along higher costs of ingredients and labor\u2014average prices at DQ are up 11% from two years ago, Bader says. The franchise model once again lends itself to a capital-light business that can grow on its own by reinvesting profits.<\/p>\n

All three CEOs are confident that Berkshire will remain in good hands once Buffett, 92, passes the reins to Greg Abel, the company\u2019s vice chairman in charge of non-insurance operations.<\/p>\n

\u201cHe is a busy man, yet he\u2019s always available when I\u2019ve needed something,\u201d Bader tells Barron\u2019s. \u201cWe\u2019ve had great conversations and I continue to learn a lot from him.\u201d<\/p>\n

Abel comes to Brooks headquarters in Seattle, Wash., around twice a year to talk strategy and plans for the business. He tried on the entire Brooks lineup of shoes on his last visit, Weber says, in addition to shoes from its competitors\u2014something Buffett never did. \u201cThe main difference is that Greg is a faster runner,\u201d Weber says.<\/p>\n

See\u2019s Egan adds another contrast: Buffet prefers the peanut brittle, while Abel goes for the pecan buds. \u201cAs leaders, you can\u2019t ask for more,\u201d he says.<\/p>\n

Write to Nicholas Jasinski at nicholas.jasinski@barrons.com<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

OMAHA, Neb.\u2014Warren Buffett\u2019s Berkshire Hathaway conglomerate includes dozens of wholly owned companies acquired over the past six decades, plus a sizable equity portfolio. From the smallest subsidiary to leading businesses like Geico, the BNSF railway, or Berkshire Hathaway energy, all exhibit Buffett\u2019s preferred investment characteristics.\u00a0 Those include durable competitive advantages\u2014what Buffett calls a \u201cmoat\u201d\u2014consistent profits, […]<\/p>\n","protected":false},"author":1,"featured_media":5292,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[241],"tags":[83],"class_list":["post-5291","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-markets","tag-featured","post_format-post-format-gallery"],"yoast_head":"\n3 Berkshire Hathaway CEOs on Buffett, Abel, and Managing for the Long Term | iFintechWorld<\/title>\n<meta name=\"description\" content=\"OMAHA, Neb.\u2014Warren Buffett\u2019s Berkshire Hathaway conglomerate includes dozens of wholly owned companies acquired over the past six decades, plus a 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