Why There Will Never Be Another Warren Buffett

There has been a lot of speculation over who will take over when Warren Buffett steps down.  Buffett is the creator, founder, and mastermind behind the success at Berkshire Hathaway. Berkshire Hathaway (BRK-A) is the highest valued stock in the stock market with a price of $116,305.00 per share. Buffett has turned early investors into multimillionaires through his shrewd investment moves.

Rumors have Li Lu taking over for the longtime Berkshire chairman when he finally does retire. Lu is a Columbia graduate and chairman of Himalaya Capital Management. Lu has made a number of smart investments including his deployment of capital in BYD Company Limited. Although Lu is a very successful investor, he will be placed in a situation where it will be impossible to duplicate the results of the investing legend.

Here are a few reasons why there will never be another Warren Buffett.

1) The stock market’s days of double digit growth are likely over.

There will always be potential in smaller stocks for double digit gains but the market as a whole will not be as robust as it once was. The 5 largest stakes in the Berkshire portfolio are Coca Cola, Wells Fargo, American Express, Proctor & Gamble, and Kraft Foods. These 5 large cap stocks represent nearly 70% of the entire $48 billion dollar public stock portfolio. These are all great companies but none are expected to grow at a double digit rate. A lot will depend on Buffett’s successor’s ability to make strategic acquisition to Berkshire Holdings. Buffett has a knack for knowing that GEICO and Dairy Queen would be great additions to the company’s holdings.

2.)  Buffett’s successor will be managing a multibillion dollar portfolio.

It will be impossible with a portfolio that large to come near the past successes of Warren Buffett. Buffett has been able to generate an average return of 20% annually for over 45 years. In his 2008 annual report Buffett himself stated that “Berkshire’s past record can’t be duplicated or even approached. Our base of assets and earnings is now far too large for us to make outsized gains in the future.” An informed investor actually has a better chance of outperforming Berkshire due to their ability to take advantage of new opportunities and remain nimble in the marketplace.

3) Investors buy shares of Berkshire Hathaway for one reason and one reason only, Warren Buffett.

Everyone wants to own what Buffett owns. The disclosure of his holdings each quarter drives fund managers and investors alike to acquire shares of Buffett’s newest acquisitions. I am convinced that investors trying to mimic the moves of Buffett plays some small part in the rising prices of Buffett’s investments. When Buffett is no longer at the helm, will investors pay up for shares of Berkshire and scramble to acquire the newest Berkshire acquisition?

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18 Responses to “Why There Will Never Be Another Warren Buffett”

  1. On a side note, the worst part for the successor is that he will always be compared to Buffet!

    I wouldn’t want to be in his shoes…

  2. avatar John says:

    I agree with you, especially on point 1… the 90’s charts are terrific! Lots of movement and opportunities to buy and hold. I don’t think we’ll see that again in our lifetime…

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  4. avatar Sheffield says:

    regarding buffett, here’s a nifty resource that shows dynamic updates to his Berkshire Hathaway portfolio:
    http://buffettbuys.com

    enjoy!

  5. Nope, never another Buffet. Where he was born, how he was raised and the times he lived in can’t be duplicated. He was old school. He invests old school. Anyone today is coming up in a modern world. Different styles, different thoughts. I don’t agree people buy Berkshire for Buffet. Somewhat though, but mainly for performance. If you make money they will come. But no more Buffets anymore.

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  7. I agree, nobody will be able to replicate Warren Buffett’s path to success!

    I don’t know if who ever replaces Warren will be able to do it cold turkey… I think a long transfer of position would be necessary, just to build confidence in the new guy…

  8. [...] I am a huge fan of Buffett but I dissagre. [...]

  9. avatar Kevin says:

    Oh come on. First off, you’re wrong on two points. Buffett was neither the founder nor the creator of BRK. He forced Seabury Stanton out and continually pumped money into his failing textile business for decades. Warren himself regards his acquisition of Berkshire as a folly of ego.

    Second, while you’re right that American Express, Coca-Cola, Kraft, and P&G are not likely to make substantial double digit returns on equity alone, you’ve neglected the fact that all of these companies do post significant returns on equity whilst simultaneously returning ever-increasing and consistent dividends. Return on capital and return on equity are not the same thing and you’ve radically underestimated the returns to the shareholders, which in this case is Berkshire.

    Warren is fond of often saying that “trees don’t grow to the sky” and that investors should guard against unrealistic ongoing returns. However, as a very longtime Berkshire shareholder, I would continue to invest long after Warren has left. He’s done a remarkable job of installing exceptionally talented managers in his subsidiary companies and he’s given them unprecedented autonomy for decades. You’ll find that Warren may give the sign off, but he initiates very few of the domestic Berkshire investments these days.

    Speaking of which, Lu is certainly no slouch, but my money is on Ajit Jain who has been producing breathtaking returns since heading up General Re in 86.

  10. Saying it is impossible for someone to duplicate the results of Buffett is defenetly a strong inductive argument but it is certainly not sound, nothing is impossible.

    • avatar Mark says:

      Buffett had great investing wisdom and the perfect market. I don’t think the market will average double digit returns going forward.

  11. Buffet would find it hard to lose money now he has made such a name for himself, purely because of the mimics of his moves by other investors driving prices up instantly making him profit.

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