From a big-picture view, Berkshire Hathaway is one of the most diversified enterprises in corporate America. The company owns businesses spanning insurance, transportation, utilities, energy, retail, and manufacturing, among others, making it difficult to find a comparable peer on Wall Street.
Yet Berkshire has always been more than a collection of operating companies. It has also functioned as Warren Buffett’s investment vehicle, operating in many respects like a mutual fund backed by wholly owned businesses. Buffett’s famously hands-off management style left subsidiary executives largely alone, while he focused on allocating the company’s vast and growing pool of cash into stocks and acquisitions.
That approach reflected Buffett’s core investing philosophy: buy well-run businesses at attractive valuations and hold them for the long term. If those businesses performed adequately, there was little reason for intervention. As a result, much of Buffett’s time, and Berkshire’s success, hinged on how effectively he invested the company’s capital.
The Buffett record investors are being asked to price
The results of that philosophy are hard to dispute. Berkshire is now the ninth-most-valuable company in the United States, the country’s second-largest property and casualty insurer, and the owner of roughly 200 operating businesses. Its holdings range from BNSF, one of America’s four “class 1” railroads, to a sprawling utilities portfolio and consumer brands such as Brooks running shoes and See’s Candies.Buffett began as a classic value investor, buying companies trading below the accounting value of their assets, before evolving into one of the most successful growth investors of the modern era. His most lucrative bet was Apple, accumulated between 2016 and 2018 and now Berkshire’s most profitable investment.
He embraced the idea of economic moats, which are durable competitive advantages that allow companies to earn returns above their cost of capital. Today, Berkshire owns Apple stock worth about $65 billion and Coca-Cola worth $28 billion, alongside stakes in regulated or brand-protected franchises such as Bank of America, valued at about $32 billion, Moody’s at roughly $13 billion, Visa at about $3 billion, Mastercard at around $2 billion, and American Express, of which Berkshire owns about a fifth, valued at $58 billion.
Buffett’s most consequential innovation, however, lay in how he funded those investments. By building a vast insurance operation, beginning with National Indemnity in 1967 and later GEICO and a large reinsurance business, Berkshire gained access to insurance float, premiums collected before claims are paid. That capital underwrote some of Berkshire’s largest deals, including the purchase of BNSF and the quarter stake in Occidental Petroleum.
The Abel era begins with a safety net
From January 1, day-to-day control passes to Greg Abel, who has worked under Buffett for decades. Buffett, now 95, will remain chairman of the board and has said he will continue coming to the office, but his exit from operational leadership closes one of the longest and most consequential tenures in modern corporate history.
Abel inherits a company with a formidable buffer against early missteps. At the end of the third quarter, Berkshire held more than $380 billion in cash and short-term investments. That cash pile serves both as a safety valve and an opportunity, capital that could be deployed into acquisitions, investments or other uses at a time when interest rates are falling and the opportunity cost of holding cash is rising.
Unlike Buffett, Abel is not known as a stock-picker, having risen through Berkshire’s energy business. That distinction has sharpened scrutiny of the company’s investment bench, particularly after the December departure of Todd Combs, one of Buffett’s key investment lieutenants, to JPMorgan Chase.
A hands-off legacy and a possible lever for change
Berkshire’s operating record under Buffett has not been uniformly smooth. Profit margins at BNSF have disappointed since its acquisition, and the once-heralded Kraft Heinz investment with 3G Capital ended badly, culminating in the company announcing a split in September. Buffett’s defining aversion to forced synergies between subsidiaries produced stability, but also left room for underperformance.
That legacy presents Abel with a potential lever. While dramatic change appears unlikely, subtle shifts could unlock value. Buffett himself acknowledged uneven performance in his 2024 annual report, writing: “In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings.”
With nearly 200 companies soon under his direct stewardship and a background as a manager, Abel could take a more active role in overseeing operations. Even modest improvements across a handful of businesses could materially affect Berkshire’s results, without overturning the company’s long-standing model.
Capital allocation under the spotlight
Capital allocation will be Abel’s first major test. Berkshire could pursue another large acquisition, possibly in insurance, where it already owns an 8% stake in Chubb, or expand further into utilities or Japanese trading houses, areas where Abel has experience, according to The Economist. The cash hoard also positions Berkshire to act during a market downturn, though investors are now weighing whether that influence will be diminished without Buffett’s personal authority.
Another option is returning cash to shareholders. Berkshire has not paid a dividend since 1967, and its internal valuation rules limit share buybacks at current prices. Introducing a dividend, expanding financial disclosure and adopting more conventional governance practices, including the recent appointment of its first general counsel, would move Berkshire closer to a typical large-cap corporation, The Economist noted.
The man and what remains
Buffett leaves behind more than a balance sheet. He leaves a philosophy shaped by patience, restraint and enjoyment of the work itself. “I have a lot of fun doing what I do every day,” he said in 1999. “You better enjoy it as you go along… the trick is to enjoy what you’re doing that day.”
He often spoke candidly about luck, early mistakes and responsibility. “Leave your kids enough money that they could do anything, but not enough so they could do nothing,” he said in 1992. Last month, he accelerated the dispersal of Berkshire stock to foundations set up by his three children, totalling about $1.3 billion. In his Thanksgiving letter, he reminded readers: “Kindness is costless but also priceless.”
As Berkshire enters its first day without Buffett as chief executive, the offices, routines and much of the philosophy remain intact. What departs is the singular force that bound them together, and the near certainty that came with it. Whether Berkshire can still be a millionaire maker may now depend less on genius and more on execution.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)