Berkshire Hathaway: Change of Buffett
In the pantheon of king-size challenges, it’s hard to imagine there’s anything much bigger than the one facing Greg Abel as he prepares to step into Warren Buffett’s size 12s at Berkshire Hathaway. Tim Cook must have felt a jitter or two when he succeeded Steve Jobs at Apple, but Buffett has been at the helm of Berkshire Hathaway for 60 years, transforming a medium-sized textile maker into a mighty conglomerate and winning himself a reputation that’s hard to challenge as the greatest investor of all time.
Buffett’s decision to retire at the tender age of 94 was not a huge surprise to the many thousands of devotees who made the trip to Berkshire’s annual shareholder meeting in Omaha, Nebraska, particularly after the death in 2023 of his longtime business partner Charlie Munger, and in typical style he dropped the bombshell in the last five minutes of a four-hour question-and-answer session. He leaves the business in rude health, with the share price at a record high having gained 20% this year, in contrast to the S&P 500’s decline of 3%.
The big question is how Berkshire will outlast a founder who was synonymous with the company, particularly in an age in which conglomerates have largely fallen out of favour. Buffett is on record as saying that he and Abel think alike on acquisitions and capital allocation, not that it will be easy to find many acquisitions that make a material impact on a company worth $862bn, and he promised his grateful followers that he “would still hang around”.
McDonald’s: Collapsed arches
Despite the contribution that widespread consumption of weight-loss drugs such as Ozempic is making to the shrinking of the national waistline, the US consumer also appears to be cutting back on the frequency of visits to the Golden Arches. McDonald’s has announced its biggest quarterly drop in sales since the outbreak of Covid. It seems that uncertainty about what might emerge next from the White House is not just causing companies to question their long-term capital allocation, it is also making the man in the street pause before popping in for a Big Mac.
Generally you would expect fast-food chains to be a good defensive play in tough economic times; punters tend to trade down from proper restaurants but they still need to eat. Still, McDonald’s CEO Chris Kempczinski said fast-food industry visits in the US were down about 10% among low- and middle-income customers. The company is doing what it can to lure the crowds by extending promotions such as its “$5 meal deal”, but they are refusing to bite.
Globally sales were 1% down — though sales in the Middle East picked up as the impact of boycotts over Gaza lessened — but Kempczinski said the company had surveyed consumers in top global markets about their views on US brands in general and had noted an eight- to 10-point rise in anti-American sentiment, with people suggesting they would be cutting back on buying them. That may well end up being one of the more significant impacts of Donald Trump’s “liberation day”, particularly in markets that he has singled out for special treatment.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.