No. of Recommendations: 42
The market chatter and concern about Berkshire Hathaway’s transition to Greg Abel is imo vastly overstated. Inside Berkshire, as we all know, Greg has long since earned a reputation as an exceptionally capable manager and, in practice, has been co-managing the company for at least a year—if not longer. He’s been running the op cos, our biggest holdings, much longer.
Let’s not forget: Warren Buffett has been planning this transition for decades. For more than 35 years, Berkshire skeptics have asked the same tired question — “What happens when Warren dies?” Buffett’s response back then still applies today: “You can be assured I’ve given this a lot of thought.”
As for the stock, his other quip comes to mind: “The only advice I have is—buy it when I die.”
Greg Abel isn’t inheriting a problem; he’s inheriting an ideal starting point. Berkshire is on track for strong, possibly record earnings in November — just before the official transition — and the company sits atop a staggering pile of cash equivalents roughly equal to Berkshire’s entire market cap not so long ago.
That’s the result of a historic cash-generating machine that continues to gush money even as it patiently awaits its next wave of investment. Berkshire has reached the “heads I win / tails I win even more” stage of capital allocation.
And unless the stock spikes dramatically in the final quarter, Abel will also begin his tenure with a fair, reasonable valuation — the very benchmark Warren knows everyone will use (fairly or unfairly) to judge his successor’s performance. I don’t think the stock price is intentional, but it’s the ideal setup. For Greg.
Historic P/E ratios and book-value metrics don’t tell the entire story anymore. Because..What’s the “forward book” of a company that will EVENTUALLY deploy $300 billion+ (today plus $4 billion a month coming in) into cash-generating assets? Berkshire’s transformation into a collection of operating companies has been gradual, yes I get it, but it’s ongoing — and opportunities always come. Cycles have not been repealed, but they’ve been lengthened recently.
In a sense, Berkshire today resembles a pre-IPO powerhouse: you’re investing in an enterprise that’s already throwing off staggering cash, with massive future moves still ahead. You just don’t know when they’ll happen. The right response is patience — not panic. I don’t see much of that here or elsewhere. As Rick Guerin learned (the third member of the Buffett–Munger–Guerin trio), even the smartest investors can get into trouble by rushing the process. Learn to live with boredom. Embrace it! Your mental health will improve and you’ll be wealthier, too.
As for “the culture question”? Please. Seriously. Berkshire’s culture isn’t going anywhere. Greg Abel IS that culture — and if he ever highly unlikely veered off course, Howard Buffett is quite literally seated to make sure he doesn’t. That’s ALL Howie will do. He WILL make damn sure. A somewhat more “hands-on” approach with perhaps a few more companies in Greg’s operational wheelhouse isn’t a shift in philosophy; it’s CONTINUITY. Warren himself can be selectively extremely hands-on when it mattered — the Washington Post is just one example. Salomon he TOOK OVER! I could go on…
In short: this transition has been planned for decades, the operating-company side of Berkshire is in stronger hands than ever, and we may even see a timely opportunity or two with stocks land right in Greg’s lap — assuming, of course, the market hasn’t outlawed declines altogether.
Meanwhile, Berkshire’s cash register keeps ringing — roughly a billion dollars a week — while the next chapter quietly writes itself.
Warren has had decades to write this script, I couldnt imagine a better one.
