Tens of thousands of Berkshire Hathaway shareholders take their seats in the enormous CHI Health Center in Omaha each May for what the financial community has long regarded as a cross between an annual meeting and a secular pilgrimage. The event focused solely on one individual for decades. This year, with Greg Abel taking over as CEO and Warren Buffett formally stepping down, the room was filled with a different kind of attention: the quiet, slightly nervous attention of people watching a handoff they’ve been assured will go smoothly, trying to determine whether or not to believe it. For his part, Abel appeared completely unaffected by the pressure of anticipation. It turns out that maintaining that calmness is part of the plan.
Buffett’s paradigm is not altered by Abel’s strategy for Berkshire. The next level is being laid by a different pair of hands on the same base, making it more akin to a refurbishment. Patience over urgency, margin of safety over momentum, and a cash pile over $300 billion that most other executives would have used years ago in response to shareholder demand are all still in place. In a market where true deals are hard to come by due to valuations, Abel has been open about seeing that money as an asset rather than a problem. In a sense, the discipline needed to hold that much capital while markets continue to rise is an active investment choice. That may not be appreciated by everyone, but Abel doesn’t seem to care.
His portfolio changes and the operational lens he applies to business evaluation are where his fingerprints are most noticeable. Abel oversaw the kind of big, intricate, capital-intensive operations that educate you to analyze a company from the inside out rather than from a spreadsheet during his decades as CEO of Berkshire Hathaway Energy.
According to reports, he considers customer data, competitive positioning, and a company’s future state rather than its present state when evaluating an acquisition. Buffett’s perspective, which has traditionally been more focused on the financial analysis of long-lasting consumer brands, differs from that operator’s. Neither strategy is incorrect. Simply put, they are distinct instruments that read the same score.
There has already been some fluctuation in the equity portfolio, indicating Abel’s readiness to make rational choices as circumstances change. Berkshire tripled its investment in Alphabet and completely sold its interest in Amazon, which was a symbolic rather than a substantial ownership.
The interpretation of it is quite simple: Abel is not ideologically against technology businesses, but he wants them at prices that support the viewpoint. He also seems to think that Alphabet’s economics support the wager in a way that Amazon’s valuation did not at the time of the leave. There’s a noteworthy selectivity there. This is a focused call on certain names rather than a general embracing of technology.
The other thread worth keeping an eye on is Japan. Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo are among the sogo shosha trading conglomerates in which Berkshire has progressively expanded its holdings. Abel has expanded this strategy to include Tokio Marine. Strong capital-return discipline and shareholder alignment, which are, to be honest, simpler to find in some Japanese corporate structures than in many American ones at the moment, are what unify such holdings.
Under Abel’s leadership, this international bias might intensify. It’s still unknown how far he’s willing to go or whether a truly significant acquisition, the kind that would characterize his age in the same way that BNSF defined Buffett’s final years, is already sitting somewhere in that $300 billion, just waiting to materialize.
