Irreplaceable Warren Buffett Isn't Basis for Investing
NEW YORK ( TheStreet) -- Warren Buffett's revelation about his prostate cancer sent shares of Berkshire Hathaway down 1.3% on Wednesday, a deeper dip than the broad market but not exactly panic.
There's the deserved praise about Buffett's outsize role at Berkshire behind the share selling, and the market reaction gives some support to the most obvious case: He is irreplaceable.
Being irreplaceable, though, and all of the fears about succession and post-Buffett Berkshire Hathaway that come with it, does not preclude the stock from being a good trade.
This is what investors should focus on. It's not cruel, or disrespectful. In fact, for a man who has built what is viewed as the single greatest wealth machine of his generation by applying dispassionate investing logic, Buffett would advise you to focus on the value of the company.
Ask yourself this: If Buffett were to die tomorrow in a car or plane crash, would you be prepared to make the right investment decision? My point is that these little dribs and drabs that remind the market that succession is an issue at Berkshire Hathaway aren't preparing the investor very well to answer the fundamental question, and these headlines won't be going away.
Between now and the last succession headline -- the day the name in the envelope known only to the Berkshire board is revealed -- there are plenty of questions an investor needs to consider.
The name that will ultimately be selected from the Buffett successor short list -- a popular topic today -- isn't among the important questions. The investor won't know until they know who Buffett's successor is anyway, and when they do know, it won't matter: Bet that Berkshire shares will sell off no matter who is named Buffett's replacement and prepare a strategy for that day.
So let's run through the issues that you need consider today, but also needed to consider yesterday, the day before that, a year ago, and will need to keep in the back of your mind tomorrow and the day after that.
Critics say the Berkshire Hathaway succession plan is secretive and being secretive really responsible for the headline selling. The reality of whether or not sticking with Berkshire makes sense comes down to a few simple points:
You either trust Buffett and the board on succession or you don't -- and you won't be getting a better answer -- so you shouldn't own the stock if this paralyzes you.
Do you trust that Berkshire Hathaway has been structured specifically to function on a kind of "auto pilot," or at least will be left in able hands accustomed to running their own wholly owned subsidiaries, which is, after all, a staple of Buffett's hands-off management approach throughout his empire?