Latest news with #Berkshire-like
Mint
4 days ago
- Business
- Mint
Replacing Warren Buffett's insurance mastermind is Berkshire's next succession mystery
Now that Warren Buffett has said Greg Abel will succeed him as Berkshire Hathaway's CEO at year-end, Berkshire watchers are turning their attention to a different succession mystery: Who will fill Ajit Jain's shoes? For nearly four decades, Jain has been the brains behind Berkshire's insurance powerhouse. Its profits have helped Buffett expand his conglomerate and seed his stock portfolio. A risk-pricing mastermind, Jain has crafted policies insuring Chicago's tallest building against terrorist attacks, Pepsi against having to award a $1 billion raffle prize, and baseball teams in the event that star players such as Alex Rodriguez got hurt. Along the way, he has made Berkshire billions of dollars. 'Even kryptonite bounces off Ajit," Buffett once wrote. But Berkshire's man of steel (and statutory accounting) is now 73, and last year Jain said he gave Berkshire's board a shortlist of possible successors. Whoever follows Jain will inherit a business in transition. New competitors are moving in. Berkshire's biggest insurance moneymaker in recent years has been auto coverage. Buffett and Jain declined to comment for this article, and Berkshire hasn't disclosed the names on Jain's list. But insurance-industry insiders have some ideas. Joe Brandon, CEO of Alleghany Brandon, 66, is on his second stint at Berkshire after the company's 2022 purchase of Alleghany, a Berkshire-like conglomerate whose business spans insurance, steel fabrication and Squishmallow plush toys. He 'understands both Berkshire and insurance," Buffett said at the time of the purchase. Brandon also spent seven years running General Re, one of Berkshire's major providers of reinsurance, or insurance for insurance companies. He resigned in 2008 after federal prosecutors pressured Buffett to let him go following fraud convictions of four other former Gen Re executives. Brandon was never charged. Todd Combs, CEO of Geico Combs, 54, already has two jobs: heading Geico and helping manage a portion of Berkshire's investment capital. In five years leading the nation's third-largest auto insurer by premiums, Combs has modernized Geico's use of technology and shored up earnings and reserves. Buffett recently called the improvement 'spectacular." Combs also has a record of Berkshire-like returns and Berkshire-style humility. He earned a net cumulative 34% while running a hedge fund from 2005 to 2010, a financial crisis-era period when the S&P 500 produced 1.15%. Still he maintained such a low profile that when he accepted an investment manager job at Berkshire, the media couldn't find a photo of him. Combs's experience insuring more unusual and expensive risks is limited, however, and some analysts believe his money management responsibilities could expand when Buffett retires. Peter Eastwood, CEO of Berkshire Hathaway Specialty Insurance Since Buffett coaxed him away from AIG more than a decade ago, Eastwood, 58, has added a new arm to Berkshire's commercial insurance operations, building property-casualty insurer BHSI from scratch. The company started in 2013, turned a profit within 15 months and has since built up more than $15 billion in reserves, according to a person familiar with the company. Buffett has called Eastwood's hiring 'a home run," and BHSI now has offices across the U.S., Europe, Asia and Australia. Still, it is a smaller proving ground than some of the other companies in Berkshire's insurance empire, such as National Indemnity Company and Gen Re. Kara Raiguel, CEO of General Re Jain once called Raiguel, 52, his 'secret weapon." Practically a Berkshire lifer, she spent more than a decade working closely with him at Berkshire Hathaway's reinsurance division in Stamford, Conn., helping evaluate some of the company's biggest bets. Raiguel took over Gen Re in 2016 and reserves have swelled. Ratings firm A.M. Best said in November Gen Re has taken 'significant" actions toward bringing the prices policyholders pay better into line with the risk the firm takes on. Jain, who works from Berkshire's reinsurance offices in Stamford, hasn't said how long he plans to remain in his role. He grew up in India, earned an engineering degree and then sold early IBM computers before moving to the U.S. to attend Harvard Business School. Jain was still in his 30s, with no experience in the insurance industry, when Buffett hired him in 1986. Within six months, he was running Berkshire's entire reinsurance business. He soon became known in the industry for his warm manner, his close listening ear and his willingness to say no if he can't make money. Jain's meticulously priced deals brought in big lump sums, well beyond what Berkshire was getting from Geico's plain-vanilla auto insurance business. There was enough cash to pay claims and plenty left over for Buffett to deploy. Most hotshot investors have to ask people for money; Berkshire just collects insurance premiums. That is why Buffett once advised shareholders—in the event of a shipwreck where they could rescue only one drowning Berkshire executive—to 'swim to Ajit." Over the past decade, pension funds and other catastrophe bond investors have been displacing traditional property and casualty reinsurance capital, while private-equity firms have pushed into life insurance and annuities. Jain and Berkshire adapted by building out commercial insurers like Eastwood's group and by whipping Geico into shape. The auto insurer's underwriting earnings have outpaced all of Berkshire's other insurance businesses combined for the past two years running. For Jain's successor, the most important quality to replicate may be not his knack for making money but his talent for not losing it, said Christopher Bloomstran, chief investment officer of Semper Augustus Investments Group, a Berkshire investor. No other firm has the same capacity to pay for disaster recovery or bail out an underwater insurer. As long as Berkshire's next insurance chief is also comfortable saying no, the cash pile Jain helped build—arguably his most important contribution to Berkshire—will long outlast him. Jain 'is unique," said Stephen Catlin, executive chairman of the specialty insurer and reinsurer Convex. 'He will be a very hard act to follow." Write to Heather Gillers at
Yahoo
21-05-2025
- Business
- Yahoo
Billionaire Bill Ackman May Be the Next Warren Buffett, and 33% of His Portfolio Is Invested in 2 Brilliant Stocks
Hedge fund manager Bill Ackman hopes to emulate Warren Buffett by turning Howard Hughes Holdings into a "modern-day Berkshire Hathaway." Ackman's hedge fund, Pershing Square Capital Management, currently has 33% of its portfolio invested in two stocks: Uber and Alphabet. Uber is uniquely positioned to benefit from autonomous driving technology, and the stock looks attractive at its current valuation. 10 stocks we like better than Uber Technologies › Warren Buffett took control of Berkshire Hathaway in 1965 and turned the textile mill into a holding company. He promptly diversified into insurance to create a steady stream of investable cash in the form of premium payments. Buffett used that capital to buy stocks and acquire businesses, turning Berkshire into a trillion-dollar company in the process. Billionaire Bill Ackman wants to recreate that success with Howard Hughes Holdings. His hedge fund had $1.4 billion invested in the stock as of March, and Ackman in added another $900 million in May. He plans to use Howard Hughes as a vehicle to create a "modern-day Berkshire Hathaway" by purchasing controlling interests in quality companies. Ackman is already highly visible in the financial world. His hedge fund, Pershing Square Capital, beat the S&P 500 (SNPINDEX: ^GSPC) by nearly 30 percentage points over the last five years. So Ackman could become the next Buffett if he turns Howard Hughes into a diversified Berkshire-like business. Meanwhile, Ackman has 33% of his hedge fund invested in two brilliant stocks: 19% in Uber Technologies (NYSE: UBER) and 14% in Google-parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). That both stocks account for such large percentages of the total portfolio shows conviction. Here's what investors should know. Uber is a leader in mobility and food delivery services. It operates the largest ride-sharing platform and second largest restaurant food delivery platform in the U.S. in terms of sales. It also ranks as the largest ride-sharing platform in nine other countries, and the largest food-delivery platform in eight countries. That scale affords Uber important advantages. First, Uber can cross-promote its own products because it provides mobility and delivery services through a single mobile app, and the company is executing: 30% of first delivery trips come from mobility users, and 22% of first mobility trips come from delivery users. Second, Uber benefits from a strong network effect, meaning its platform becomes more valuable to consumers with each new driver (and vice versa). Third, Uber collects a tremendous amount of data because of its scale. It uses that information to continuously improve its ability to dispatch drivers, route rides, and set prices. That data has also given rise to a booming advertising business. Uber can use what it knows about consumer delivery habits to help brands target ad campaigns on its mobile app. Fourth, Uber is uniquely positioned to help autonomous driving companies bring robotaxis to market because it already operates the largest ride-sharing platform in the world. CEO Dara Khosrowshahi says autonomous driving technology will unlock a trillion-dollar opportunity in the U.S. alone, and Uber is already making moves to capitalize. It recently partnered with WeRide to bring robotaxis to Abu Dhabi and soon Dubai, and they will expand to 15 new cities (including some in Europe) during the next five years. Uber has also partnered with Alphabet's Waymo in Phoenix, Austin, and Atlanta. Waymo robotaxis just launched in Austin and strong initial results could lead to a further collaboration with Uber in the U.S. Uber estimates adjusted EBITDA will increase 32% in the second quarter, and management has guided for similar results through 2026. That means adjusted earnings should increase at roughly the same pace, which makes the current valuation of 16 times earnings look very reasonable. Patient investors should feel comfortable buying a position in this stock today. Alphabet is the largest ad tech company in the world because of its ability engage internet users and source data through platforms like Google Search and YouTube. The search market is undoubtedly shifting toward artificial intelligence (AI) tools, and competitors like Perplexity and ChatGPT are a potential threat. But Alphabet is leaning into that opportunity with its own generative AI overviews. Alphabet also runs the third largest public cloud in terms of infrastructure and platform services (CIPS). Google Cloud accounted for 12% of total CIPS spending in the first quarter, up a percentage point from the same quarter last year but flat sequentially. As a recognized leader in AI infrastructure and large language models, the company could keep gaining market share as AI demand increases. Importantly, Alphabet is currently involved in two antitrust lawsuits brought by the Justice Department that could lead to a breakup, meaning the company may have to sell certain assets. Judges have already ruled against Alphabet in both lawsuits and the cases have now moved to the remediation phase. Most analysts think the courts will stop short of breaking up the business, but investors should be aware of the risk. Wall Street estimates Alphabet's earnings will increase at 7% annually through 2026. That makes the current valuation of 18 times earnings look reasonable, especially because the company beat the consensus earnings estimate by an average of 14% during the last six quarters and similar outperformance is plausible in future quarters. The ad tech and cloud services markets are projected to grow at 14% annually and 20% annually, respectively, through 2030. Alphabet is losing market share in digital advertising, but YouTube and Google Search are still two of the most engaging web properties. And the company is gaining share in cloud services. If it maintains that momentum, earnings could grow faster than expected. Before you buy stock in Uber Technologies, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Uber Technologies wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $642,582!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,879!* Now, it's worth noting Stock Advisor's total average return is 975% — a market-crushing outperformance compared to 172% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Howard Hughes, and Uber Technologies. The Motley Fool has a disclosure policy. Billionaire Bill Ackman May Be the Next Warren Buffett, and 33% of His Portfolio Is Invested in 2 Brilliant Stocks was originally published by The Motley Fool Sign in to access your portfolio
