Warren Buffett chooses successor

US investor Warren Buffett has chosen who will succeed him as the new head of Berkshire Hathaway, but has not yet revealed the identity of the favoured one to shareholders.

The Sage of Omaha said in his annual letter to shareholders: “Your board is enthusiastic about my successor as CEO, an individual to whom they have had a great deal of exposure and whose managerial and human qualities they admire. (We have two superb back-up candidates as well.)

“When a transfer of responsibility is required, it will be seamless, and Berkshire’s prospects will remain bright. “

He said the person would “enjoy a running start” once he and vice chairman Charlie Munger retire.

“Do not, however, infer from this that Charlie and I are going anywhere; we continue to be in excellent health.”

Buffett has had a tough year with net earnings attributable to Berkshire Hathaway falling from $12.9bn to $10.7bn. However, book value per share, Buffett’s preferred measure, rose 4.6% and beat the total return of the S&P 500 index which was up 2.1%.

Berkshire was hit by the continued slump in the US housing market, which  Buffett predicted would start to recover in 2011.

“I was dead wrong,” he admitted. “In aggregate, our five housing-related companies had pre-tax profits of $513m in 2011. That’s similar to 2010 but down from $1.8bn in 2006.” However, he was confident housing will “come back soon”.

He also dismissed gold as a valueless asset for the second time this month.

“True, gold has some industrial and decorative utility, but the demand for these purposes is both limited and incapable of soaking up new production. Meanwhile, if you own one ounce of gold for an eternity, you will still own one ounce at its end,” he said.

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