The Berkshire CEO horse race

February 26, 2011, 5:57 PM UTC

Warren Buffett’s latest letter to shareholders won’t make it any easier to handicap the race to succeed the Berkshire Hathaway chief.

The letter, released Saturday, is full of praise for David Sokol (right). The 53-year-old has been with Berkshire (BRKA) for more than a decade and is widely cast as a leading candidate to take over as CEO when Buffett, 80, eventually steps aside.

Air apparent?

But Buffett also stresses the importance of youth, a factor that may not favor Sokol.

In a section of the letter discussing the recent hiring of investment manager Todd Combs, Buffett cites a preference for youthful promise over name recognition and an established track record.

“Our goal was to find a 2-year-old Secretariat, not a 10-year-old Seabiscuit,” he writes of Combs’ hiring.

If that logic applies to the CEO search, it could favor Greg Abel (below, right). He has run Berkshire’s MidAmerican Energy since Sokol gave up the reins in 2008, and at 48 is the youngest name on the putative Berkshire short list.

Others widely mentioned in the race include Ajit Jain, 59, who has run Berkshire’s highly profitable reinsurance business for 25 years, and Matt Rose, 50, of Burlington Northern, the giant railroad that Berkshire took over last year.

Buffett praises both of them as well in the letter, noting the success of the Burlington merger and claiming that “even kryptonite bounces off” Jain. That is a quality that surely will come in handy in his super New York apartment.

But Buffett reserves his warmest words for Sokol, who wears many hats at Berkshire. He is chairman of MidAmerican, where he has spent two decades, and also serves as chairman of Berkshire’s roofing company, Johns Manville. On top of all that, Buffett asked him last year to turn around NetJets, the fractional jet ownership company whose losses prompted Buffett to tell shareholders he had “failed” them.

Sokol has since restored the company to profitability – leading Fortune last year to dub him Berkshire’s Mr. Fix-It. Buffett’s latest comments will do nothing to dim that halo.

“I can’t overstate the breadth and importance of Dave Sokol’s achievements at this company,” Buffett writes. He says Sokol “turned what was Berkshire’s only major business problem into a solidly profitable operation,” while maintaining NetJets’ crucial reputation for safety and service.

Beyond these clues, there is little discussion of the succession issue in the letter. Buffett does note that Berkshire has “multiple outstanding candidates immediately available for my CEO job,” but unhelpfully he doesn’t go on to name or rank them.

Aptly named

And as always, Buffett is in no rush to step down. Asked once whether he’d do anything to make the price of Berkshire’s Class A voting shares (lately $130,000) more affordable for individual investors, he proposed splitting his age instead.

Buffett has been slowly preparing to loosen his grip on his role as Berkshire’s chief investment officer — though the letter makes clear that even that transition will be quite gradual.

Combs has been touted, improbably enough, in some corners as being groomed to take over the giant investing portfolio from Buffett. But the letter indicates that Combs may well get some friendly competition in a process that is likely to take years, assuming Buffett retains his good health.

Buffett says Berkshire may over time bring on another investment manager or two “if we find the right individuals.” That’s in addition to Combs, who will start out managing $1 billion to $3 billion in securities – focusing at first on stocks, though he won’t be restricted to them.

That’s just a pittance in Berkshire terms: its stock holdings alone were worth more than $61 billion at year-end. The lion’s share of those funds will stay with Buffett, who clearly is not eager to let go of the investing duties, let alone the CEO reins.

“As long as I am CEO, I will continue to manage the great majority of Berkshire’s holdings, both bonds and equities,” Buffett says in the letter.

But Buffett is well aware that all of us face being led out to pasture eventually – which is perhaps the risk of colorfully comparing Combs to Secretariat.

“Whoops,” Buffett says, “that may not be the smartest metaphor for an 80-year-old CEO to use.”

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(A member of FORTUNE’s staff, senior editor at large Carol Loomis, edits the chairman’s letter in Berkshire’s annual report.)