Life After Buffett: Handicapping "What's Next" for Berkshire

You can bet that new CEO Greg Abel will make (at least) one of these moves ...

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Stock Picker's Corner (SPC)
May 09, 2025

It’s tough to picture an “investing world” without Warren Buffett actually “in it.”

I mean, I’ve been investing myself for most of my 40-year adult life.

And I’ve been a Buffett investor for decades (and wish I’d done it sooner).

Indeed, one of my favorite books of all time — and one I’ve recommended to the dozens of writers I’ve mentored through the years — is the superb “Buffett: The Making of Any American Capitalist,” by Roger Lowenstein.

Source: AbeBooks

Yeah … it’s tough to picture the investing colloquy without the “Oracle of Omaha” as part of it.

Yet, that’s what we’re dealing with here …

This past weekend, Buffett said that — after 75 years as a professional investor and 60 years running Berkshire Hathaway Inc. $BRK.A ( ▼ 0.51% ) / $BRK.B ( ▼ 0.57% )  — this year will be his last.

Buffett, 94, just told investors at the Berkshire annual meeting that he’ll step down as CEO at the end of this year — turning that role over to company Vice Chair Greg Abel.

Abel’s been there since 1999, when Berkshire acquired MidAmerican Energy, which later became Berkshire Energy. He runs Berkshire’s non-insurance businesses. And he’s got a long history in the energy industry.

In some ways, not much will change. Abel, 62, will oversee Berkshire Energy and BNSF Railway. Ajit Jain — the world’s best underwriter, according to Buffett — will run the Berkshire insurance units, which last year delivered $9 billion in underwriting profits and $13.7 billion in investment income. Jain is 72.

Then there’s Todd Combs and Ted Weschler — who are Berkshire’s stock investors … and great ones, at that. (Want a great “proof point?” From 1989 to 2018, Weschler boosted his retirement account from $70,000 to $250 million.)

I spent 22 years as a business reporter — most of it covering big public companies. I’ve seen companies “do succession” right … and I’ve seen them do it wrong.

This is the right way to do succession.

In short, in a lotta ways, Buffett’s been planning for this “handover” for decades.

So some things won’t change.

But maybe some things will …

And that’ll make it interesting …

You Already Scored

I dubbed Berkshire a “Next Bull Market Stock” last year.

And, for good reason: With a record $348 billion cash pile — up 84% from the $189 billion at about this time last year — Berkshire has a lot of “dry powder” to add to its holdings, which currently stand at:

  • A portfolio of 112 stocks, currently valued at about $280 billion.

  • More than 60 businesses owned outright — including BNSF Railway, GEICO, Dairy Queen, Duracell and Berkshire Hathaway Energy.

  • And partial/private-equity stakes in other businesses.

The big surge in cash over the past year was helped by share sales from that Berkshire portfolio and interest payments from higher-rate U.S. Treasury bills.

The fact is Berkshire companies also throw off tens of billions a year in cash from the operating profits of its companies. So — if it doesn’t get invested — that cash hoard will just keep growing.

Deploying even some of that cash will require an extended bear market — a long stretch during which Berkshire’s stock pickers can go bargain-hunting. Once they do that, it’s the “Next Bull Market” when Berkshire’s stock will really take off.

For us, that’s already happening. We put the Berkshire “B” shares in our Model Portfolio almost exactly a year ago at $406 a share. It’s now at $516 — a 27% surge that trounces the 9.8% gain of the S&P 500 during the same stretch.

But the stock market is a “what comes next” animal.

And, with Berkshire, that’s the real question: What comes next?

Let’s take a look at some possibilities …

That Giant War Chest

Let’s start by talking about all that cash.

As of May of this year, Berkshire currently ranks seventh in terms of market value among U.S.-based companies:

Buffett has always liked Berkshire’s ability to have that big war chest: Through several strategies, he used it to overcome Berkshire’s ever-growing heft.

One of those strategies: Buying back Berkshire stock.

Here’s a breakdown of those buybacks over the past five years:

  • 2020: $24.7 billion.

  • 2021: $27.1 billion.

  • 2022: $7.9 billion.

  • 2023: $8.0 billion.

  • 2024: $2.9 billion.

With the share price high — higher than the company’s “intrinsic value” — Berkshire has paused share repurchases for three straight quarters, the longest stretch since buyback authority was extended back in 2018. But, as part of my “Next Bull Market” thesis, a major market correction and a pullback in Berkshire would give Team Buffett/Abel a chance to deploy some of that $348 billion, reducing the float, increasing the earnings per share (EPS) and magnifying the upside when stocks rebound and race to new highs.

View it as kind of a “non-leverage” form of leverage.

Abel will no doubt resume those buybacks should stocks sell off.

More Adaptable Than You Realize

Buffett has always favored buybacks over that other direct deployment of cash: Quarterly dividends.

Under Buffett’s stewardship, Berkshire Hathaway has never paid a regular quarterly dividend, believing he could deploy the cash better than the company’s shareholders. Indeed, the only dividend payout was a “one-timer” back in 1967; Buffett later joked that he must have been “in the bathroom” when the decision was made.

But Berkshire has demonstrated a willingness to change when conditions mandated it.

For instance, Buffett always said he’d avoid technology stocks. He changed his stance in early 2016, when Berkshire started buying Apple. (He claimed Apple was more a consumer-products firm than a traditional tech company.)

Berkshire invested an estimated $40 billion in Apple’s shares; it ended up as one of Buffett’s greatest coups, delivering a total return of almost 800%. The company has since unloaded more than half its Apple stake, but its share-price gains mean it’s still a big part of Berkshire’s portfolio.

Stock splits were also a verboten Berkshire strategy. There, too, Berkshire was willing to change.

The company created those Class B shares in May 1996 — pinning them at 1/30th the value of the Class A shares, then trading at $22,000 each. He wanted to give everyday investors access to the “Berkshire Advantage,” and to blunt creation of expensive unit investment trusts (UITs) that were marketing themselves as Berkshire Hathaway alternatives (and, while he was at it, to finance the purchase of Burlington Northern Santa Fe Railway).

In 2010, Berkshire did a 50-for-1 split of the B shares — putting them in the hands of regular investors.

Given that propensity to adapt, what might come next for Berkshire in its “Post-Buffett Era?”

A Dividend in Berkshire’s Future?

Let’s start by circling back with that cash — which (if it keeps being stockpiled) will continue to soar.

Just look …

  • 2020: $138 billion (estimated).

  • 2021: $144 billion (estimated).

  • 2022: $128 billion (estimated).

  • 2023: $188.99 billion.

  • 2024: $334.2 billion.

  • Current: $348 billion.

Buffett likes to keep a $30 billion cash cushion. Berkshire’s at more than 10x that level.

Buybacks will likely resume — should there be a broader market sell-off.

And I’ll bet that — under Abel — dividends will be on the table.

So does billionaire Bill Ackman. Ackman recently told CNBC that Berkshire may start “returning capital” through a regular dividend — or (perhaps more likely) via a one-timer “special payout.” That’ll let Berkshire give money back to stockholders — without committing to a regular payout.

Don’t expect that to happen immediately, though. Abel will need to get his “sea legs” as the captain-in-charge of the entire Berkshire shebang — running all the businesses and being in charge of allocating all that cash.

Which brings us to the next scenario: Perhaps Abel will finish what Buffett started.

I’m talking about Occidental Petroleum Corp. $OXY ( ▲ 3.78% ), a Houston-based energy firm with trailing-12-month revenue of $27 billion and a current market value of $41 billion.

Berkshire’s Next Big Target?

Berkshire first invested in Occidental in late 2019, when Buffett chipped in $10 billion to Occidental buy Anadarko Petroleum. For his investment, Buffett got preferred stock with an 8% yearly payout and warrants to buy additional shares.

Since then, Berkshire has steadily boosted its stake: As of February, Berkshire owned more than 28% of the company. Buffett has repeatedly insisted that his company won’t take over Occidental. But with the shares down 35% from their 52-week high – and an in-house energy business that does $5 billion a year in revenue – Occidental would serve as a nice addition.

It wouldn’t make much of a dent in Berkshire’s cash reserves. And it could help rebuild them.

Profits came in at $4.7 billion in 2023 and $3.1 billion last year. Trailing-12-month profits totaled $2.4 billion.

Remember, too, that Abel’s background is energy.

Berkshire Energy has stakes in utilities, natural gas pipelines and renewable energy projects.

Some of the key portfolio pieces:

  • PacifiCorp: A major energy provider serving 1.9 million customers across six states in the American West.

  • MidAmerican Energy: A regulated utility providing electricity and natural gas to 1.6 million customers in Iowa, Illinois, South Dakota, and Nebraska.

  • NV Energy: A Nevada utility serving 90% of the state.

  • Northern Powergrid: A British electricity distributor that serves 4 million homes and businesses.

  • Northern Natural Gas: America’s biggest interstate natural gas pipeline system, spanning 11 states.

  • BHE GT&S: Operates 5,400 miles of gas transmission lines and 756 billion cubic feet of underground storage in the Eastern United States.

  • Kern River Gas Transmission: An advanced natural gas transmission system serving the U.S. market.

  • BHE Renewables: Owner of solar, wind, geothermal and hydropower projects.

  • AltaLink: The largest regulated transmission company in Alberta, where it supplies electricity to 85% of the population.

  • BHE U.S. Transmission: Focuses on long-term ownership and acquisition of transmission assets for the wholesale market.

Imagine what a Big Oil company would do in that group.

We’ll keep watching this.

It’s a company we’re still excited to own.

See you next time;