Warren Buffett announced his plan to step down as CEO of Berkshire Hathaway (BRK.A 0.18%) (BRK.B 0.09%) by the end of 2025, with Greg Abel taking over as the new CEO. Despite this transition, Buffett will remain as chairman. Since 1965, Buffett has led Berkshire Hathaway to achieve an impressive 19.9% annualized return through 2024, significantly outperforming the S&P 500. Following the announcement, Berkshire shares have dipped approximately 5%, reflecting investor concerns about the new leadership.
Berkshire Hathaway owns 189 operating businesses, including BNSF Railway, Dairy Queen, and See’s Candies. Its acquisition of GEICO in 1996 has been a major growth driver due to the float generated from insurance premiums. This float has grown from $47 billion to $173 billion over two decades, supporting a stock portfolio valued at $279 billion. Berkshire holds stakes in 44 publicly traded companies, with significant positions in Apple, Coca-Cola, and American Express.
The company also holds $348 billion in cash and cash equivalents, primarily in short-term U.S. Treasury bills yielding between 4% and 4.3%. Abel emphasized maintaining a strong balance sheet and outlined his capital allocation priorities: reinvesting in existing businesses, acquiring new companies, and investing in public equities. Abel assured shareholders that Berkshire’s investment strategy will remain consistent.
Berkshire’s substantial cash reserves position it well to capitalize on opportunities during a recession. Historically, the company has thrived during economic downturns, as seen in its investments during the 2008 financial crisis and other periods of market stress.
For long-term investors, Berkshire Hathaway remains an attractive investment due to its resilient business model and potential for growth, especially in economic downturns.
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