New official takes office, first task is to bring fire! Abel stops Buffett's era of failed investments and plans to clear out Kraft Heinz Company (KHC.US)

Warren Buffett, the investment giant who founded and has long been at the helm of Berkshire Hathaway, also known as the "stock god," may soon sell most or even all of his holdings in Kraft Heinz Company (KHC.US). This move could happen shortly after the cheese and tomato sauce manufacturing giant announced it would split into two companies just a few months ago. According to statistics, Berkshire Hathaway has lost about $8.4 billion in total on its investment in Kraft Heinz Company, including a $3.8 billion impairment charge taken against its investment last year. After January 1, 2026, Warren Buffett, the legendary figure in the financial industry known as the "stock god," officially retired. The business empire he built with his lifelong efforts, Berkshire Hathaway, will enter a new era under the leadership of his appointed successor, Greg Abel. Many have long regarded Warren Buffett as the greatest investor in the world because he transformed Berkshire Hathaway (BRK.A.US, BRK.B.US) from a struggling New England textile mill he bought into in 1962 for $7.60 per share into a vast conglomerate today, with its stock price reaching over $720,000 per share. Despite donating over $60 billion in the past 20 years, Buffett's personal wealth from his Berkshire shares still amounts to about $150 billion. In a filing on Wednesday, Kraft Heinz Company said it was incorporating over 325 million common shares held by Berkshire Hathaway, one of its largest investors, into a potential sales arrangement. Following the news, Kraft Heinz Company's stock price dropped significantly by 5.7% in pre-market trading. Legendary investor Warren Buffett, who has long been at the helm of Berkshire Hathaway, publicly expressed disappointment last year at the company's decision to split, even though he had also said that the merger in 2015 did not proceed as planned. Public records show that Berkshire Hathaway holds about 28% of the company's shares, and last year, it took a $3.8 billion impairment loss on the investment in this multinational food company. This means that its cumulative investment losses in the company have now reached $8.4 billion. Kraft Heinz Company is undergoing a major overhaul, having announced its split into two companies ten years after the $46 billion mega-merger. The company appointed a new CEO last month. Its chairman had previously blamed the poor performance on an overly complex corporate structure and failure to focus on capital allocation and prioritizing the right projects. Last year, Kraft Heinz Company initiated a process to unwind the mega-merger, with one company selling its famous Heinz ketchup, condiments, and other packaged foods, generating $15.4 billion in annual sales. The other company will sell its Oscar Mayer hot dogs and Lunchables products, currently generating approximately $10.4 billion in revenue. The split is expected to be completed in the second half of this year. The company appointed Steve Cahillane as the new CEO last month. Cahillane led a major split at Kellanova (Kellogg) in 2023, selling half the business to Mars, Incorporated. There is currently no indication that Berkshire has begun selling, but veteran analyst Cathy Seifert from CFRA Research suspects that this may just be the beginning of a comprehensive review and cleaning up of Berkshire's diverse holdings. In addition to the massive stock investment portfolio worth over $300 billion, Berkshire also owns various insurance companies, utilities, BNSF Railway, and a variety of manufacturing and retail companies. "My feeling is that Abel's leadership style could be different from Buffett's, and if this sale goes through, it will represent a change in the company's mindset," Seifert said. "Under Buffett's leadership, Berkshire usually only acquires, not divests. In our view, Abel is likely to evaluate every subsidiary of Berkshire and decide to divest those businesses that do not meet his internal standards, which is not unthinkable." Of course, Abel is already familiar with many of Berkshire's subsidiaries or business teams, as he has been managing all non-insurance businesses since 2018. However, he officially became CEO on January 1 this year. Buffett remains chairman, but investors are closely watching for any changes Abel may make to this long-established conglomerate. With record-breaking "cash reserves" in hand, the market anticipates Abel, the successor to Buffett, to continue the "Berkshire myth." Abel has proven himself to be a top manager who is more hands-on and personally involved than Buffett, but he still follows Berkshire's model of giving acquired companies autonomy. Abel will pose tough questions to the company's leadership and hold them accountable for performance. Abel announced some leadership changes earlier last month: investment manager and Geico CEO Todd Combs resigned, and CFO Marc Hamburg announced his retirement. Abel also said he would appoint Adam Johnson, CEO of NetJets, as responsible for all consumer, service, and retail businesses under Berkshire Hathaway's banner. This essentially creates a third major business unit for the company and lightens some of Abel's workload. He will continue to manage the large manufacturing, utilities, and railroad operations. Abel may soon face significant pressure from Berkshire shareholders, especially to start paying dividends. From the beginning, Berkshire has insisted that reinvesting profits is better than distributing them to shareholders on a quarterly or annual basis. However, if Abel cannot find productive uses for Berkshire's $382 billion in cash reserves, investors may push the company to start paying dividends on a large scale, or adopt traditional stock repurchase programs to enhance the value of their holdings. Currently, Berkshire only repurchases its stock when Buffett believes it is undervalued, and he has not done so since early 2024. Senior analyst James Shanahan from Wall Street financial giant Edward Jones stated that in the third quarter, Berkshire Hathaway, under the title of the "stock god" Warren Buffett, exceeded expectations, mainly benefiting from significant improvements in its insurance underwriting business and the steady contribution of its aerospace parts manufacturer, Precision Castparts. The analyst also believes that Abel, who is expected to take over from Buffett at the end of the year, will rebuild investor confidence with Berkshire's nearly $400 billion cash reserve.