Holding record-breaking "cash ammunition" in hand! The market envisions Abel, Buffett's successor, continuing the "Berkshire myth".

Legendary figure in the financial industry - Warren Buffett, known as the "Oracle of Omaha," will officially retire this week, and his business empire, Berkshire Hathaway, which he poured his heart and soul into building, will enter a new era under the leadership of his designated successor, Greg Abel. For many years, Warren Buffett has been regarded as one of the greatest investors in the world, having transformed Berkshire Hathaway from a struggling New England textile mill, which he began buying into at $7.60 per share in 1962, into a vast conglomerate with stock prices exceeding $750,000 per share today. Even after donating over $60 billion in the past 20 years, Buffett's personal wealth from his Berkshire stock holdings is still valued at around $150 billion. Over the decades, Berkshire's stock price has often outperformed one of the stock market benchmarks, the S&P 500 index. Under Buffett's leadership for many years, Berkshire completed acquisitions of insurance companies like Geico and National Indemnity, manufacturing companies like Iscar Metalworking, renowned retail brands like Dairy Queen, as well as large utility assets, and even acquired one of America's largest railroad companies, BNSF. At the same time, Buffett has acquired stock assets worth hundreds of billions of dollars over the years, and his famous long-term investments in companies like American Express Company, Coca-Cola Company, and Apple Inc. have yielded substantial returns. Buffett's actions in the stock market have influenced global investment strategies, and his quarterly portfolio changes have caused huge ripples worldwide. However, in recent years, Berkshire seems to struggle to maintain a strong pace of growth as its size has become extremely large and it is challenging to find new and significant acquisition targets. Even the $9.7 billion acquisition of OxyChem under Occidental Petroleum Corporation this fall may not have a significant positive impact on Berkshire's profits. Investors will closely monitor whether Abel will make any changes to Berkshire's development trajectory or its billion-dollar stock investment portfolio, but do not expect any seismic shifts. While Abel has been managing all of Berkshire's non-insurance businesses since 2018, Buffett will not completely leave Berkshire. Buffett will remain as chairman and plans to continue going to the office every day to help find new investment opportunities and provide important advice to Abel when needed. Some changes may occur Senior analyst Cathy Seifert from CFRA Research said it is natural for Abel to make some adjustments to Berkshire's management style in certain ways. She emphasized that given the decentralized structure with dozens of subsidiaries and nearly 400,000 employees, adopting a more flexible leadership style makes sense. Berkshire operates under a highly decentralized structure, giving its executives significant autonomy in making major decisions. All indications from the company suggest there are no plans to change this. The world learned in 2021 that Abel would be Buffett's hand-picked designated successor at Berkshire, and at an annual meeting, Buffett's long-time business partner, the late Charlie Munger, assured shareholders that Abel would continue the company's culture. One of Buffett's sales pitches to founders and CEOs considering selling their companies to Berkshire was always that Berkshire would largely allow them to continue operating the companies in the same way as long as they delivered strong results. Seifert emphasized, "The management style under Abel is likely to be more flexible than under Buffett, but I think the investment community is likely to appreciate Greg's management style because it will to some extent 'tighten up, consolidate things.'" She added, "If it helps drive performance, there really is no fault in it." Abel plays an active role in managing the company in the long term Abel has proven himself to be a solid manager who is more hands-on than Buffett and follows Berkshire's model of granting autonomy to acquired companies. Abel asks sharp questions of company leadership and holds them accountable for performance. Abel recently announced some leadership changes: investment manager and Geico CEO Todd Combs is leaving, and Chief Financial Officer Marc Hamburg announced his retirement. Abel also stated that he would appoint Adam Johnson, CEO of NetJets, as head of all of Berkshire's consumer, service, and retail businesses. This essentially creates a third major business unit within the company and allows Abel to share some of the workload. He will continue to manage the large manufacturing, utility, and railroad businesses. Abel will eventually face greater pressure, especially to potentially start paying dividends. From the beginning, Berkshire has maintained that reinvesting profits is better than distributing dividends to shareholders on a quarterly or annual basis. However, if Abel cannot find productive uses for Berkshire's $382 billion cash reserves, investors may push the company to start distributing dividends on a large scale or implement traditional stock buyback plans to increase the value of their holdings. Currently, Berkshire only chooses to buy back stock when Buffett believes the stock price is cheap, and he has not done so since early 2024. But because Buffett controls nearly 30% of the stock with voting rights, Abel will be shielded from the significant negative impact of such pressures for a period of time. After Buffett's passing, this percentage will gradually decrease - his children will distribute his massive holdings to charitable organizations according to an agreement. Berkshire has an incredibly solid long-term foundation Many of Berkshire's subsidiaries tend to fluctuate drastically with economic cycles, generating substantial profits during periods of national economic prosperity, but with Warren Buffett, the "Oracle of Omaha," personally overseeing and possessing vast cash flow assets, Berkshire's stock price tends to outperform the global stock market even during periods of intense volatility. Berkshire's utility assets typically generate stable profits year-round, while its insurance companies like Geico and General Reinsurance provide over $175 billion in premium funds that can be invested before claims mature. Renowned institutional investor Chris Ballard, managing director at Check Capital, believes that most of Berkshire's businesses "can virtually run themselves." He is optimistic about Berkshire's prospects under Abel's leadership becoming increasingly bright. One of the biggest questions currently is how many further changes there will be in Berkshire's leadership structure after the departure of the legendary veteran Todd Combs. The reason many CEOs of Berkshire's subsidiaries continue to work after reaching retirement age is because they enjoy working for Buffett. "As long-term shareholders, we are not too worried about Todd Combs' formal departure, nor do we see it as the beginning of some negative iceberg," Ballard emphasised. Ballard's own investment company even considers Berkshire as its largest position. "Todd's situation was unique. It just reminds us: the imminent departure of Warren as CEO and the separation of himself and Berkshire's daily operations are imminent, and they are preparing for a new phase - one that we are excited to see unfold." With an unprecedented amount of "cash ammunition" in hand, Warren Buffett's successor is set to make a mark, and Berkshire's stock price could see a significant rebound? James Shanahan, a senior analyst from the Wall Street financial giant Edward Jones, said that Berkshire Hathaway, led by the "Oracle of Omaha" Warren Buffett, exceeded expectations in the third quarter, mainly benefiting from a significant improvement in its insurance underwriting business and solid contributions from its aerospace parts manufacturer Precision Castparts. The analyst also believes that Abel, who will take over Buffett's position at the end of the year, will rebuild investor confidence with Berkshire's record near $400 billion cash reserve. Third-quarter performance data shows that without executing stock buybacks, Berkshire's cash reserve has ballooned to a record level, reaching $381.7 billion, with short-term US Treasury reserves even higher than the Fed's holdings of US Treasuries. This is the last quarterly earnings report during the tenure of Warren Buffett, the "Omaha Oracle," who has roamed the global business and financial markets for decades and is now 95 years old. He will officially step down as Berkshire's CEO on January 1, 2026, at which time his designated successor, Greg Abel, will take over, starting in 2026 to announce quarterly performance reports for Berkshire and write the annual shareholder letter. Undoubtedly, Buffett continues to take actions that advocate for a "cash is king" strategy, with Berkshire's cash reserve hitting a new all-time high again, drawing market interpretations that he seems to be betting on turmoil in the US economy and stock market. The vast conglomerate and investment giant, without conducting any stock buybacks, continues to sell off assets like Apple Inc. and Bank of America Corp, driving the continuous expansion of Berkshire's cash reserves. Some on Wall Street view this hoarding of cash as Buffett's effort to leave enough "cash bullets" for the "Abel era" - aiming to provide ample room for future operational activities at Berkshire. In a recent research report, Shanahan said, "Berkshire currently holds over $380 billion in cash reserves, an increase of $48 billion since the beginning of the year. Stock sales in the third quarter exceeded purchases by over $6 billion, marking Berkshire as a net seller for twelve consecutive quarters (cumulative net sales of $183 billion). In addition, Berkshire has not repurchased any of its own stock in five consecutive quarters." Shanahan stated, "After a noticeable lag behind the market following Buffett's announcement of his departure as CEO at the end of the year, we have upgraded our rating on Berkshire from 'hold' to 'buy,' seeing the sell-off as a buying opportunity. We believe that the incoming CEO, Greg Abel, will rebuild investor confidence over time. And we expect that in the short term, Abel, if he increases investment activity and/or implements stock buybacks using the vast cash flow, could be a strong catalyst for Berkshire's stock price."