Berkshire after Buffett: Key takeaways from Greg Abel’s first shareholder letter as CEO

All good investing is value investing, by definition. And the truth is, you've got to expect good times and bad times in business. Greg, you've been watching what's been happening around Berkshire? Yeah. It is a new era of Berkshire Hathaway. CEO Greg Abel out with his first annual letter to shareholders since taking the helm from Warren Buffett. Abel told investors that Berkshire will maintain, quote, a fortress like balance sheet. He didn't have the whole folksy tone, of course, that that Warren Buffett had, which is good. He didn't try and force it right. Not trying to be Warren. And he and he acknowledged, you know, that it's a tough act to follow. He did talk about preserving the culture at Berkshire. What what does that culture entail, do you think? And is he going to be able to retain it? I think it would have been, I agree, poor form to kind of modulate, you know, emulate the master. It was just riddled with the same kind of conservative value proposition that Buffett and Munger have espoused for for decades. Abel kind of outlined a doubling down on conservative underwriting, conservative position in the portfolio right now, principle based investing, shareholder oriented, you know, unforced error approach to capitalism. And that was very much reinforced in the letter and the results. You know, as an investor in this stock, this has been well telegraphed. It was good to see. The results weren't great in large part because the insurance business. Right. So what do you think Abel sort of needs to tackle on that front? I think it's classic, long term oriented Berkshire Hathaway capital allocation, Julie, and that's a good thing. And what that means is, you know, when the market's going up, this is a stock that typically does fine, but it's pretty pedestrian. But when the market, the economy is turning over, this is a stock that has been building because of its conservative orientation, you know, ammunition. And that's where we're at now. So the reason for the kind of year over year decline in the insurance business is really kind of self-inflicted. Right now, they're probably under earning, therefore. But later, when prices stabilize, normalize, they're going to take advantage of it and make really fat profits. So that is exactly what we want to see as investors. The headline looked a little worse than it really is because they wrote down both Kraft and Occidental, which are non-cash charges. So if you really kind of look at the other businesses, they did great. It was the first time in a few years that the railroad profits were up about eight percent. The manufacturing services business was up about four or five percent. Energy was up as well. These are businesses that hadn't had earnings progression for, again, multiple years. What do you think will be the sort of able identity at Berkshire Hathaway? Master, you know, execution. That's what I think able can do at Berkshire, because similarly, you know, Buffett's more of a master capital allocator, not necessarily an executor. In recent years, Geico was underperforming versus its peers. The railroad's been a couple of margins behind its peers. They've been leaning into Geico improvements and working, making some, like I said, some nice improvements so far on railroad. I think Abel's behind a lot of that. I think you'll do a lot of that going forward. This is a company that will continue to lean into operating earnings from these businesses. I also think that Buffett has given him a big softball with a $370 billion of cash that's also under earning at these low rates. So between operating improvements, some some improved rates, hopefully on this big cash treasure chest. I, you know, I think they're under earning right now. And I think the next five years to look could look quite promising for sure. Do you think there's any pressure on Abel to make bigger moves with that cash pile? Yeah, that's that's the million dollar question, Julie. I think over time there will be pressure. I think this cash pile looks quite well-timed for them. I think they're going to have, as Buffett used to say, some chance when there's blood in the streets to to really make some money. Berkshire Hathaway's stock has been kind of sideways over the the past year or so, a couple of years. If you're an investor who doesn't own it already, is there a case to be made for buying it now at these levels? The stock has been flat for a year. Julie, you're right. Over five years, it has shockingly still outperformed the S&P 500 because it didn't really lose in 22 when there's, you know, pretty significant market correction. So it's been a good five year run. The last year, not so much. So, yeah, that does provide a decent point. It's not mouthwateringly cheap at one point, five times book value. Julie, you know, that's why the stock, you know, was not purchased by Able and Company in 2025. To put it in perspective, in 20 and 21, they bought roughly 25 billion dollars of their own stock each year. So that's telling you something there as well. So it is decently priced. Probably the best value proposition for for an investor right now is this gives you, you know, an ability to be in a very great flywheel business that produces prodigious cash flows, outstanding risk adjusted returns and get capital appreciation without as much risk. And that has not changed at all.