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Recently, Warren Buffett announced his retirement as CEO of Berkshire Hathaway (NYSE: BRK.B), concluding a remarkable 60-year tenure. At 94, the legendary investor known as the ‘Oracle of Omaha’ cited the natural effects of aging as reasons for stepping down.
His retirement marks the end of an era for Berkshire, which, under his leadership, grew into a $1.11trn business. During this time, he navigated the company’s investment strategy across diverse industries from insurance and railroads to consumer goods.
Despite stepping down as CEO, Buffett will remain as chairman, offering guidance during significant market events.
What now?
Taking the reins will be Greg Abel, who has overseen the company’s non-insurance operations since 2018. He was named Buffett’s successor in 2021, having been described as a ‘natural’ who requires no mentoring. Buffett emphasised that Abel, 62, possesses the energy and capability to lead the company into the future.
While the praise is encouraging, investors will keep a close eye on how Abel handles capital allocation — a role Buffett mastered over decades. Following the Trump administration’s recent U-turn on certain trade tariffs, the US stock market is showing signs of recovery. The move has led to a surge in IPO activity as companies aim to capitalise on the improving market conditions.
That could put Abel in the perfect position to start his tenure – assuming he has similar wisdom and guile as his predecessor.
So far, things look good.
Berkshire Hathaway’s Class B shares are already up 14% this year — a strong indication that investors have confidence in the company’s resilience and future prospects. And analysts project further growth, with some price targets eyeing a 12% increase. For now, it seems, the market is optimistic about Abel’s leadership.
However, its latest results are less impressive.
In Q1 2025, the firm reported operating earnings of $9.6bn, a 14% decline from the previous year, primarily due to $1.1bn in wildfire-related insurance claims and adverse foreign currency impacts. Net income dropped 64% to $4.6bn, influenced by unrealised losses on major equity holdings, including Apple.
Despite these setbacks, the company’s financial position remains solid. Cash reserves recently ballooned to a record $347.7bn as Buffett took a conservative approach and sold stock amid unfavourable market conditions. Meanwhile, total debt decreased by 14.6% year on year to $77bn, highlighting his prudent financial management. The company’s debt-to-equity (D/E) ratio now stands at an easily manageable 19.17%, underscoring a strong balance sheet.
Well prepared
Needless to say, investors will likely remain cautious for some time. The transition of leadership from Warren Buffett to Greg Abel introduces uncertainty regarding future capital allocation decisions. Additionally, the company’s exposure to climate-related events, such as wildfires, poses ongoing risks to its insurance and utility businesses.
Fortunately, a diverse portfolio matched with a large cash pile makes it well-prepared to weather any market conditions. Should things start to improve, it will be ready to take advantage of low-cost stocks before they rally.
As such, I think Berkshire is still a stock worth considering as global markets look poised for a new phase of growth.
