Berkshire's post-Buffett era starts with a homebuilder: Chart of the Day

Greg Abel’s archetypal large Berkshire Hathaway (BRK-A, BRK-B) woody looks acquainted connected purpose: cash, housing, and a concern the institution already understands.

But Berkshire’s $8.5 cardinal acquisition of Taylor Morrison (TMHC) is not conscionable a Buffett rerun. It gives investors their archetypal large capital-allocation work connected the post-Buffett epoch — and raises a caller question: whether Abel’s Berkshire volition simply ain much businesses, oregon commencement knitting immoderate of them together.

The banal backdrop makes the woody much than a footnote.

Since Buffett said helium would measurement down arsenic CEO, Berkshire has fallen 13%, portion the S&P 500 (^GSPC) has gained 33%, according to Yahoo Finance information and analysis. Since Abel became CEO, Berkshire is down 5%, portion the scale is up 11%.

That is the market’s aboriginal scorecard. Investors are not conscionable asking whether Berkshire inactive owns large businesses. They are asking what Abel volition bash with the superior Buffett near behind.

“Investors person been eagerly awaiting Greg’s archetypal M&A determination since succeeding Warren Buffett arsenic CEO of Berkshire,” CFRA expert Catherine Seifert wrote Monday, estimating Berkshire has $80 cardinal to $100 cardinal of “dry powder” disposable for buybacks and acquisitions.

Taylor Morrison fits Berkshire’s lodging orbit.

Berkshire already owns Clayton Homes, existent property brokerage HomeServices of America, and building-products businesses including Acme Brick, Johns Manville, Shaw Industries, Benjamin Moore, and MiTek.

“The lodging rhythm volition crook astatine immoderate point, and demographics would constituent to important pent-up request erstwhile it turns,” Glen View Trust main concern serviceman Bill Stone said. “Further, nary 1 knows erstwhile the rhythm volition crook but Berkshire has the superior spot and quality to beryllium patient.”

That makes the acquisition casual to understand. The absorbing portion is what happens next.

Seifert wrote that portion Abel is expected to uphold Berkshire’s decentralized culture, “an statement tin beryllium made to consolidate immoderate of Berkshire’s acold flung subsidiaries into much streamlined operating divisions.”

That is wherever the woody starts to consciousness little similar Buffett and much similar Abel.

Buffett built Berkshire astir autonomy, letting businesses run with small interference from headquarters. Abel whitethorn support that culture, but the Taylor Morrison woody suggests helium whitethorn besides look for ways to marque related pieces enactment much similar a platform.

The woody besides hardly dents Berkshire’s equilibrium sheet.

Berkshire reported $397 cardinal successful currency for the archetypal quarter, making Taylor Morrison a archetypal measurement successful the Abel epoch — not an reply to Berkshire’s currency pile.