Without question, Warren Buffett is the world's greatest living investor, maybe the best of all time. In his 60 years as chairman and CEO of Berkshire Hathaway (BRK-A)(BRK-B), he has generated cumulative returns of 5.5 million percent, a compounded annual growth rate of 20%, twice as much as the S&P 500.
Although there are other legendary investors who may have generated better returns for their portfolios, like Peter Lynch at Fidelity Magellan or Peter Druckenmiller at Duquesne Capital Management – both achieved 30% CAGRs – they left at the top of their game. Lynch stepped away from his fund after 14 years; Druckenmiller after 30.
It's possible they would have continued their incredible runs had they remained at the helm for decades to come, but only Buffett has such a career spanning six decades with incredible excess return. There is a reason he is called the Oracle of Omaha.
Buffett, though, shocked the annual Berkshire Hathaway shareholders meeting on Saturday by announcing he wanted its board of directors to approve making Gregory Abel, long considered his heir-apparent, CEO of the company.
While Buffett said he will stay with Berkshire Hathaway as board chairman and that he “would still hang around and conceivably be useful in a few cases,” Abel will have the "final word" on operations, investments, and more. Buffett will remain chairman until his death, afterwhich his son Howard will assume the role.
It is a transition everyone knew was eventually coming, and it seemed more imminent following the death of his long-time partner Charlie Munger in December 2023. But with Buffett now officially stepping down by the end of the year, a question investors must ask is, is Berkshire Hathaway still a buy without Warren Buffett at the helm?
Abel has been with Berkshire Hathaway since 1999 when Buffett acquired a controlling interest in MidAmerican Energy, an Iowa-based electric and natural gas utility. An accountant by training, Abel has held several executive positions in Berkshire Hathaway, most recently serving as chairman and CEO of Berkshire Hathaway Energy (the renamed MidAmerican Energy), and vice-chairman of non-insurance operations of Berkshire since January 2018.
Undoubtedly, as Buffett groomed Abel for the CEO role for some time, he allowed Abel to make investment decisions. It has been reported Buffett's investing lieutenants Ted Weschler and Todd Combs were making investments for Berkshire Hathaway, but only purchases of less than $1 billion. For those above that threshold, Buffett made them himself, and presumably Abel, too. Now, Abel will have sole authority over all investment decisions.
Abel already has exhibited considerable dealmaking prowess, spearheading major acquisitions like PacifiCorp in 2005, NV Energy in 2013, and Dominion Energy’s (DE) pipeline business in 2020. Buffett has expressed confidence in Abel’s capital allocation skills and his low-key, disciplined approach aligns with Berkshire’s decentralized, value-driven culture. He is not expected to change Buffett's long-term, value-oriented investment philosophy.
Yet it is true Buffett's reputation has historically bolstered Berkshire’s valuation premium. Abel does not necessarily have the Oracle's charisma and certainly not his public profile. He is also not a traditional stock picker, but will instead rely on his business acumen to allocate capital, which may differ from Buffett’s investment-driven approach.
And Abel has a lot of capital to allocate. Berkshire Hathaway has amassed a massive $348 billion cash stockpile. For 10 consecutive quarters, Buffett has been a net seller of stocks, indicating he sees a market correction on the horizon.
While those cash reserves position Berkshire to capitalize on market opportunities, especially in downturns, it also highlights the difficulty of finding high-return investments at its scale. Buffett himself noted that few U.S. companies can “move the needle” for the portfolio.
Abel will be assuming the CEO role amid a volatile economic climate, including a possible recession, that will test his ability to navigate these turbulent waters. Moreover, Abel’s operational focus may shift priorities toward Berkshire’s subsidiaries rather than high-profile equity investments, potentially altering its investor appeal.
There is also Berkshire Hathaway's valuation. BRK-A stock trades at approximately 1.8 times book value, above Buffett’s historical buyback threshold of 1.2 times, suggesting it’s not undervalued. Investors need to assess whether its premium reflects growth potential under Abel.
It will also be important to watch how Abel deploys the cash pile and whether he pursues new sectors or sticks to Buffett’s playbook.
Berkshire Hathaway remains a compelling investment due to its robust financial position, diversified portfolio, and Abel’s proven operational expertise. The company’s $348 billion cash reserve underscores its resilience and Abel’s alignment with Berkshire’s culture and Buffett’s ongoing involvement mitigate risks of a disruptive transition.
However, investors should be prepared for potential short-term volatility as markets digest Buffett’s exit, and Abel faces challenges deploying capital at Berkshire’s scale in a high-valuation environment.
For long-term investors, Berkshire’s fundamentals and Abel’s track record suggest it remains a solid choice, though those prioritizing Buffett’s personal investment genius may want to temper their expectations.
