OMAHA, Neb. (AP) — Greg Abel paid tribute to his predecessor Warren Buffett while pledging in his first shareholder letter that Berkshire Hathaway would not exit investments or make major changes to the way it operates.
Abel said he will always maintain Berkshire’s financial strength, but investors shouldn’t view the company’s $373.3 billion in cash as a sign that the company isn’t interested in new investments. That number was actually down slightly from the $382 billion in the third quarter. Abel said the cash acts as “dry powder” to ensure Berkshire is ready to take action at a moment’s notice.
“Our balance sheet is a strategic asset deployed at the right time. It allows us to act decisively, invest when others are hesitant or fearful, and stand firm when financial storms hit,” Abel wrote.
But Abel did say Berkshire would avoid acquiring any business that “undermines the fabric of society or could harm Berkshire’s reputation,” without explaining which companies the standard might exclude. CFRA research analyst Cathy Seifert said she wonders whether Abel thinks AI companies are destroying society.
Abel did discuss some of Berkshire’s largest investments in Apple and American Express stocks, and detailed how the company more than doubled its money on the books through investments in five Japanese trading companies. But Berkshire Hathaway did take a $4.5 billion write-down on the value of its holdings in Kraft Heinz Co. and Occidental Petroleum Co.
Berkshire again did not repurchase any shares in the fourth quarter. Abel told shareholders not to expect him to start issuing quarterly comments because Berkshire has a long-term approach. Seifert said she appreciated his matter-of-fact approach to the letter.
“He came into this role from a very different perspective. He wasn’t the one who built the role. He had to run the thing,” Seifert said.
Investors are closely watching any changes he might make, but Abel and Buffett said there would be no major changes to the way Berkshire operates. Because it’s been working really well for the last six years.
Buffett remains chairman and largest shareholder, so he’s still helping guide the Omaha, Nebraska-based conglomerate he founded. But Abel is now writing annual letters that are consistently considered among the most read business reports because Buffett’s stellar track record and down-to-earth wisdom and advice have led many investors to admire and follow Buffett.
Abel announced some changes to the lineup for the May shareholder meeting. The first Q&A session will be co-hosted by Abel and Ajit Jain, Berkshire’s vice chairman of insurance operations. Then, in a second panel, Abell will answer questions from BNSF CEO Katie Farmer and NetJets CEO Adam Johnson, who now helps oversee all of Berkshire Hathaway’s consumer, services and retail operations.
The only preliminary changes so far have been some executive moves since Abel took over and a January filing showing Berkshire was considering selling some or all 325 million Kraft Heinz shares. But Buffett is likely to support the move because he has commented on the excessive fees Berkshire paid to help Heinz merge with Kraft, and he has been critical of the packaged food giant’s plan to split into two companies. Many investors are trying to emulate Buffett’s moves in Berkshire Hathaway’s massive stock portfolio.
But Berkshire Hathaway is powered by the dozens of companies it owns, including major insurance companies like Geico, BNSF Railroad, some major utilities, and various manufacturing and retail companies. Berkshire Hathaway owns well-known brands such as Dairy Queen and See’s Candy, as well as companies that supply products needed by other industries, such as Precision Castparts, Lubrizol and Iscar Metalworking.
Abel already knows many of Berkshire’s companies well, as he has been running all non-insurance companies since 2018, and executives who report to him praise his insight into the different businesses.