In his first letter to shareholders as CEO of Berkshire Hathaway Inc., Greg Abel hinted at a significant shift in the company’s investment strategy by omitting two of its largest holdings from his list of “core” investments. This notable absence raises eyebrows regarding the future direction of the company following Warren Buffett’s long and legendary tenure.
Abel, in his letter, highlighted a “concentrated approach” towards businesses that Berkshire intends to retain for the long term, identifying Apple Inc., American Express Co., Coca-Cola Co., and Moody’s Corp. as the “Core Four” stocks deemed essential for future growth. However, the exclusion of Bank of America Corp. and Chevron Corp. from this designation is striking, especially considering they rank among the company’s top five holdings by market value, as cited in its fourth-quarter 13F filing.
The omission reflects a broader strategy that appears to prioritize sustained performance over mere stock size. This is corroborated by a 9% reduction in Berkshire’s stake in Bank of America during the last quarter of 2022, alongside a 7% increase in its investment in Chevron during the same period.
In addition to highlighting key investments, Abel’s leadership transition also brings forth a candid evaluation of some underperforming assets. He characterized the investment in Kraft Heinz Co. as “disappointing,” acknowledging that its returns have fallen “well short of adequate.” Despite this critique, Berkshire is shifting its focus toward operational recovery rather than pursuing a breakup of the struggling food giant.
As Berkshire Hathaway embarks on this new era under Abel, he is fostering a culture of stewardship and decentralized autonomy, which contrasts the more centralized decision-making style of Buffett. With a new compensation structure reflected in a base salary of $25 million—significantly higher than Buffett’s long-standing $100,000—Abel underscores a commitment to maintaining “fortress-like” financial strength, with cash reserves now surpassing $370 billion.
Abel’s strategic pivot might pose challenges, but it also sets the stage for a potentially invigorated approach to investments and company operations, aiming for long-term growth while navigating through market fluctuations. The shareholders now have a compelling narrative to follow as Berkshire Hathaway charts its course in the post-Buffett era.