Berkshire Without Buffett: What’s Next for the Company and the Stock
As the legendary investor prepares to step down as CEO, here’s what his designated successor, Greg Abel, should do to bring Berkshire into the 21st century.
Key Points
- Warren Buffett will step down as Berkshire Hathaway’s CEO after 60 years, with Greg Abel taking over, though Buffett will remain chairman.
- Berkshire Hathaway stock has risen 11% in 2025, lagging behind the S&P 500’s 16% gain, and has underperformed the index over the past three, 10, and 15 years.
- Berkshire Hathaway has a market value over $1 trillion, nearly $50 billion in after-tax earnings power, and over $350 billion in cash.
It’s the end of an era for Berkshire Hathaway as Warren Buffett prepares to step aside as CEO. Investors shouldn’t worry about the change—in fact, they should welcome it.
The CEO succession promises to be one of the most closely watched in American business. After 60 years at the helm, the 95-year-old Buffett will pass the baton to Greg Abel, his handpicked successor. Buffett won’t be disappearing from the scene—he will remain chairman and plans to be in the office every day at Berkshire’s Omaha, Neb., headquarters to offer advice—but the company won’t be the same.
Nor should it. Buffett fans might not like to hear it, but the CEO transition is coming at a good time. Buffett has slowed down in recent years and grown increasingly cautious. Berkshire’s massive cash holdings have been a drag on performance; Buffett has been selling stock, when he should have been buying; and recent acquisitions have left much to be desired. Berkshire stock has risen 13% in 2025, lagging behind the S&P 500’s 16% gain, and it has underperformed the index over the past three, 10, and 15 years. It’s a very un-Buffett-like performance.
Enter Abel. The 63-year-old executive and Berkshire veteran has spoken at the company’s annual meeting, but he’s something of an unknown quantity. He ran Berkshire’s energy operations before becoming vice chairman and head of the company’s vast non-insurance businesses in 2018. He has Buffett’s trust. But for Abel to succeed, he can’t follow his mentor’s lead.
If the case for investing in Berkshire once rested on Buffett, it will now have to thrive as a “normal” company, and it should do some things it never had to: pay a dividend, hold quarterly earnings conference calls, and perhaps even move to index some of Berkshire’s equity investments. Berkshire needs to become a different company—and it must play to Abel’s strengths.
“Abel has a strong operational and financial management background,” says Cathy Seifert, a CFRA analyst. “He doesn’t have professional money-management experience, and he doesn’t have the Street cred like Buffett.”
Buffett’s Street cred was built up over 60 years, and despite the recent weakness, he is leaving Berkshire in great shape. The company has a market value of over $1 trillion, nearly $50 billion of after-tax earnings power from a diverse group of businesses, a $300 billion equity portfolio led by Apple and American Express, and what Buffett calls a Fort Knox balance sheet with over $350 billion in cash.
Berkshire is also the world’s largest conglomerate, at a time when conglomerates have fallen out of favor. Property-and-casualty insurance is its most important division—it accounts for a quarter of revenue and about half its value—and includes Geico, the No. 3 auto insurer in the country. The other key units include Burlington Northern Santa Fe, one of the two big railroads west of the Mississippi River; Berkshire Hathaway Energy, a large electric utility that also owns natural-gas pipelines; and a real estate brokerage business. Each is probably worth $100 billion or more.
Then there are dozens of other divisions, including Lubrizol (chemicals), Pilot (truck stops), Precision Castparts (aircraft parts), and odds and ends like International Dairy Queen, Duracell batteries, and NetJets, a leader in fractional private-jet travel. Assessing the whole, Buffett wrote this past week in a Thanksgiving letter to Berkshire shareholders that Berkshire’s businesses in aggregate have “moderately better than average prospects led by a few non-correlated and sizable gems.”
Buffett’s performance hasn’t met the “moderately better than average” bar in recent years. While he is renowned for his acquisition skills, the past decade and a half of takeovers has been disappointing. Lubrizol’s earnings are no higher than when Berkshire bought the company for $9.7 billion in 2011, and Berkshire’s stake in Kraft Heinz —the successor to Heinz—is worth less than the $9 billion Berkshire put into the investment. Precision Castparts is now worth more than the $37 billion that Berkshire paid for it, but it has taken 10 years to get there, and almost any other aerospace-related investment would have done better—even Boeing. Berkshire’s $13 billion purchase of Pilot looks fair, not great, while the 2022 purchase of insurer Alleghany for under $12 billion is one of the few real winners. Overall, Berkshire would have done much better to put the $80 billion it plowed into the five buys into an S&P 500 index fund.
Berkshire, moreover, is a 20th-century company without a meaningful tech subsidiary and just one sizable tech equity investment, a $76 billion stake in Apple. New winning equity investments in the past five years have been few, aside from a group of Japanese trading companies, and Berkshire sold numerous stocks in 2020-22 at a fraction of their current prices, including JPMorgan Chase and Wells Fargo.
Buffett also cashed out a $100 billion gain on his best investment, Apple, but has left about $50 billion on the table given Apple’s subsequent gains, Barron’s estimates. The Apple sales are partly responsible for Berkshire’s $350 billion-plus in cash—a figure that even Buffett has conceded is high. “Berkshire missed the stock market rally while hoarding cash,” says Jim Shanahan, an Edward Jones analyst.
Still, there is some trepidation over Buffett’s impending departure. Berkshire stock has lagged behind the S&P 500 by over 20 percentage points since Buffett made the surprise announcement at the company’s annual meeting in May that he would step down at year end. Some of the “Buffett premium” has leaked out of the stock. Since then, Berkshire stock has dropped 5%, while the S&P 500 has gained 20%.
Buffett, though, isn’t stepping away completely. Along with remaining chairman, he plans to keep a “significant amount” of Berkshire stock until Abel establishes himself. Buffett owns just under 14% of the company—a stake worth $150 billion—and holds about 30% of the vote because nearly all of his stake consists of class A supervoting shares, as opposed to the B shares favored by most individual investors. He’s giving away about 5% of that stake annually.
Abel, for his part, is no slouch. While Buffett has taken a more hands-off approach—he preferred investing to managing—Abel is a capable operational and financial manager whom the Oracle of Omaha credits with improving the performance of Berkshire’s subsidiaries. Buffett has repeatedly expressed confidence in Abel and his ability to guide Berkshire, a view he reiterated this past week, writing in his Thanksgiving letter that he is a “great manager, a tireless worker and an honest communicator. Wish him an extended tenure.”
But even Buffett had Charlie Munger, Berkshire’s late vice chairman, to help him. Abel, who will address Berkshire investors in the annual shareholder letter around March 1, hasn’t said much about whom he plans to lean on as he takes command of the Berkshire empire. The company has some strong executives, but certain key people could follow Buffett into retirement. Besides Abel, Berkshire’s most important executive is Ajit Jain, 74, the head of insurance operations, a brilliant insurance risk assessor and a Buffett confidant for nearly 40 years. He may retire in the next year or two. Potential replacements are the Berkshire insurance executives Kara Raiguel of reinsurer General Re and Joe Brandon of Alleghany.
Then there are investment managers Todd Combs, 54, and Ted Weschler, 64, who now run about 10% of the $300 billion equity portfolio, with Buffett handling the rest. When they joined Berkshire more than a decade ago, Buffett said they would take it over when he stepped aside, but he later said in annual meetings that Abel should run the portfolio, raising questions about Weschler and Combs’ future role. Combs also has run Geico, Berkshire’s auto insurance unit, for six years, but that job—which was supposed to be temporary—could be nearing an end with Geico’s financial revival in the past two years.
Berkshire has no functions common in big corporations, such as investor relations, public relations, or corporate counsel, and Abel may want to add some of these areas and get help running Berkshire. He could also draw on former colleagues from his tenure at Berkshire’s utility business, including Adam Wright, who now heads Berkshire’s Pilot truck-stop unit. Abel might also do something un-Berkshire-like, and look outside the company for talent.
With conglomerates on the outs with investors who prefer pure-play companies, some will argue that Berkshire should be broken up. But it’s a tribute to Buffett that the number of companies seeking to become more Berkshire-like by combining insurance and investments keeps growing. That includes heavyweight asset managers such as Apollo Global Management, KKR, and Brookfield, as well as investors like Bill Ackman, who wants to build a mini-Berkshire with a real estate company, Howard Hughes Holdings. In Berkshire, investors can buy the real thing, with all of its advantages.
“Every activist and investment banker will argue that, in a world without Warren and Charlie, Berkshire’s unorthodox structure shouldn’t persist. I think Berkshire is worth defending,” said Chris Davis, an investment manager and Berkshire board member in a 2023 Barron’s interview. Davis said the board’s role will be to protect Berkshire’s culture.
Abel, though, should consider spinoffs or sales of smaller businesses. Berkshire is too big to be managed optimally. It has over 60 subsidiaries, but only 10 really matter. He should also loosen some of Buffett’s strictures on acquisitions, but stick with what he knows. Berkshire, for instance, hasn’t participated in corporate auctions, and that limits its flexibility. Buffett, though, has been willing to buy anything if he liked the business and the price was right. Abel should focus on his circle of competence, notably energy and utilities. Berkshire’s recent $9.7 billion deal to purchase Occidental Petroleum’s chemical business is in keeping with that approach.
Even with its current business mix, Berkshire should be able to top the S&P 500—assuming intelligent capital allocation—especially if index returns are more moderate than the 14% annual gains over the past decade. Here’s the math: Berkshire’s stock price has long followed growth in its shareholder equity, or book value. With its earnings power, and assuming modest stock market gains, Berkshire should be able to generate high-single-digit annual growth in book value in coming years, and that could translate into similar gains in the stock. This all makes Berkshire a good choice for conservative investors.
“The thing that gives me comfort is the absolute financial strength of the company,” says Bill Stone, chief investment officer of Glenview Trust. “It owns a diversified group of businesses, and the balance sheet is amazing. You sleep well at night owning it.” Buffett underscored the safety of Berkshire, writing this past week that “Berkshire has less chance of a devastating disaster than any business I know.”
Edward Jones’ Shanahan is bullish, given what he sees as the company’s reasonable valuation of about 1.5 times book value. That is admittedly in line with its average of the past five years. It trades for about 22 times this year’s earnings—in line with the overall market. Berkshire watchers focus on a measure called “look-through earnings,” which gives it credit for the profits of the companies in its equity portfolio. That adjusted price/earnings ratio is in the high teens.
Abel will have some tough decisions to make, starting with what to do with Berkshire’s cash hoard. It’s one thing for the company to bank hundreds of billions of dollars with Buffett in charge, but investors may want Abel to offer a plan to bring it down. A big acquisition seems unlikely given the elevated stock market. Abel’s plan could include buying back stock—Berkshire hasn’t repurchased shares since May 2024—but it should also pay a dividend, something the company hasn’t done since paying a tiny one in the late 1960s and nearly every non-tech megacap company does. Investors have been comfortable letting Buffett invest Berkshire’s cash and earnings, but with Abel at the helm, the argument for resisting a dividend breaks down.
A 2% dividend would cost Berkshire about $20 billion annually—less than 50% of its operating earnings. Even with that payout, Berkshire’s cash levels wouldn’t decline. That even argues for a potential special dividend. The downside for Buffett is that he would have to pay over $500 million a year in taxes if Berkshire paid a 2% dividend, given the size of his stake. That isn’t a reason not to pay one, though. A dividend is likely after Buffett’s death, so why not pay one now.
Abel will also have to decide what to do with Berkshire’s investment portfolio. Buffett has said that if Berkshire can’t top the market, investors might as well buy a low-fee S&P 500 index fund. It’s something Abel should consider with part of Berkshire’s equity portfolio. Berkshire’s stock-picking record in the past decade has been mixed: a big hit with Apple and Japanese trading companies, but several misses, including buying a big stake in Occidental stock before it bought the chemical business. Combs and Weschler probably have underperformed, too, with the latter believed to be responsible for two longtime portfolio underperformers, DaVita and Sirius XM Holdings.
Abel could also name a chief investment officer to oversee Berkshire’s entire portfolio, which is dominated by stocks. He could also start building a bond portfolio, like other insurers who park most of their investments in fixed-income securities. Berkshire runs a “barbell” portfolio of cash—over $350 billion—and stocks—$300 billion—and just $17 billion of bonds.
Abel’s ultimate success will depend on establishing his credibility—and Berkshire’s—without Buffett. He should start by buying more Berkshire stock. While nearly all of Buffett’s net worth is in Berkshire, that’s unlikely the case for Abel. He bought about $100 million of stock in late 2022 and early 2023, and his total stake is now worth $175 million.
That’s bigger than what most CEOs own. His net worth, however, is likely close to $1 billion after he sold a 1% stake in Berkshire Hathaway Energy back to the company for nearly $900 million in cash in 2022, and he earns more than $20 million a year. Buying stock at current levels would be a sign of confidence and commitment by Abel to Berkshire holders.
He should hold quarterly earnings conference calls, which would allow investors to better evaluate the complex company. He should also provide better financial disclosure by regularly releasing profit numbers on Lubrizol and other businesses, something Berkshire currently doesn’t do. More information on the insurance operations would be helpful, too, including policy trends at Geico.
More than anything, Abel must spin a new story. Buffett has said there are three million Berkshire shareholder accounts, a huge figure that somewhat overstates the number of individual investors. The company will need a new base to replace an aging group of individual holders. To attract them, Abel will need to articulate a vision for a post-Buffett Berkshire. It could be something like this:
“I plan to build on the platform that Warren Buffett created and use Berkshire’s durable and ample earnings for investments, acquisitions, share repurchases, and dividends. Berkshire will be a more focused company under my leadership, with greater financial transparency, and maintain a Fort Knox balance sheet.
“I realize I can’t be Warren Buffett. But with the help of our talented managers, I pledge to improve our subsidiaries and turn what is the largest conglomerate in the world into the best-run conglomerate. My goal is to attract a new generation of investors to Berkshire and position the company to produce market-beating returns over time.”
With over 80% of its revenue from the U.S. and a group of diversified businesses, Berkshire is the closest thing to a mutual fund in the stock market, and it should remain a worthwhile investment.
As long as Abel proves able.
