Buffett Leaving Berkshire Creates a ‘Vacuum Risk’ and a $381 Billion Question

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I started the discussion by acknowledging something that feels almost unnatural for long-time Berkshire watchers. Warren Buffett is struggling, at least by his own historic standards. With Buffett expected to step away from the CEO role within weeks, Lee and I agreed that the timing of recent events has only amplified investor anxiety.

A rare break from long-term outperformance

Lee reminded me that we have covered Buffett and Berkshire Hathaway for nearly 20 years, and since 2000 the company has outperformed the S&P 500 almost every single year. That streak is coming to an end. The stock has gone through a rocky period, and that kind of volatility is not what investors associate with Buffett’s steady hand. Once Buffett publicly committed to stepping aside, the margin for error narrowed, and the market has become far less forgiving.

Todd Combs and the vacuum risk

The most troubling development we discussed was the departure of Todd Combs. As one of Buffett’s two key proteges, Combs played a central role in portfolio management and in supporting Greg Abel, the executive expected to lead Berkshire going forward. When Combs left to take a role at JPMorgan Chase, it immediately raised a hard question. Who finds the next great ideas?

Lee pointed out that Combs or his investment cohort were likely behind Berkshire’s position in Alphabet (NASDAQ: GOOGL). Even though Buffett was late to that trade, it remains one of Berkshire’s most strategically important modern holdings. The concern now is whether there is another investor inside Berkshire capable of sourcing similar opportunities in a market that is far more complex than it was twenty years ago.

Selling stocks and stockpiling cash

Another focal point of our conversation was Berkshire’s enormous cash hoard, now roughly $341 billion. I argued that this is not a sign of confusion, but discipline. Berkshire’s cash balance will likely continue to grow until markets correct and valuations become more attractive. Whether Buffett himself or his successors pull the trigger, there are clearly stocks the team likes. They just do not like them at current prices.

Lee agreed, noting that patience has always been core to Berkshire’s DNA. The difference now is that investors are watching closely to see whether that patience translates into decisive action once opportunity appears.

What might come next

Lee brought up Boeing (NYSE: BA) as a potential example of the type of company Berkshire could target. After years of turmoil following the 737 Max crashes and operational failures, Boeing has begun to stabilize and has secured large new orders. Historically, Berkshire has favored exactly these kinds of battered but essential companies that are likely to survive and recover.

Core holdings still dominate

We closed by looking at the current portfolio. Apple (NASDAQ: AAPL) remains Berkshire’s largest holding by a wide margin, even after substantial trimming. The same is true for Bank of America (NYSE: BAC), which has also been reduced significantly. How aggressively the next leadership team continues to reshape these positions will say a lot about Berkshire’s future identity.

For now, Berkshire sits at an inflection point. Underperformance, executive departures, and a looming leadership transition have unsettled even its most loyal shareholders. Whether that uncertainty creates an opportunity or signals a longer adjustment period will depend on how effectively the post-Buffett team proves it can do what Buffett did better than anyone else.

Transcript:

[00:00:00] Lee Jackson: Now let’s talk about Tom Combs leaving and how it’s underperformed, et cetera.

[00:00:06] Doug McIntyre: Warren Buffett has been having a tough time now. He’ll be retiring, I think in about three weeks. But yeah, he’s

[00:00:12] Lee Jackson: pretty much out the door from

[00:00:13] Doug McIntyre: the CEO slot. Since he said he was gonna leave, he’s had some real problems.

[00:00:19] Part of it is departures of senior people, but the other one is the stock has been, it’s been a rocky period for the stock, which, it’s not traditional for him.

[00:00:31] Lee Jackson: No, because we had done some work on this ’cause we’ve covered Buffett and Berkshire for almost 20 years here at 24/7. And, literally since 2000, he outperformed the s and p 500 almost every year, if not every year.

[00:00:47] That ain’t gonna be the case this year. And yeah, I think, It’s not surprising when people leave. Just ask Old Miss. But, when, somebody like Todd Combs walks out the door, he was one of the two, Buffett proteges, that were helping him with the portfolio, helping the guy that’s stepping in to be the new CEO, he was, they were the guys that were helping him.

[00:01:14] When Todd takes a, job at JP Morgan to do. Some investment strategy stuff. I’m, I don’t really remember exactly what he’s gonna do there, but a, he must have got a huge paycheck to go there, and he’s probably filthy rich anyway, because he is been at Berkshire for years. But that’s not a good sign for Berkshire.

[00:01:33] That’s not a good sign because who’s gonna be the stock pickers? who’s gonna find the new ideas? And I think you know, it, was probably him or his, cohort that suggested Google. Even though, Buffett was late to the Google purchase, it’s in there. And as, as you’ve said a lot, and it’s been your favorite big name, is there gonna be somebody to find more good ideas like that?

[00:02:00] Because all they’ve been doing is selling for the last couple of years, and they have that huge pile of cash, like 341 billion of cash. So. Do you think that, I think some investors, especially longtime investors, are concerned that is every anybody else gonna go, the other people gonna

[00:02:20] Doug McIntyre: leave. Well, there’s a second part about this and that is everybody talks about the cash.

[00:02:25] The cash on that balance is going to grow until the market drops. Right. It may not be Buffett, it may be as proteges, but there are a bunch of people sitting there who love some stocks and they’re waiting for them to get to the point where they think that they’re a good buy. Yeah. They love the stocks.

[00:02:43] They love them now, but they don’t love ’em at these prices.

[00:02:48] Lee Jackson: Yeah. I agree. And it’s funny, I. there was an upgrade for Boeing, and Boeing’s gotten some huge orders and it’s been a nightmare over the last five years, the 737 max crashes and, all of that stuff, and it’s gonna probably be a name like Boeing or, maybe some other company that’s been beaten down hard, but, will survive and exist.

[00:03:10] But yeah, it’s gonna be interesting how. The portfolio evolves going forward. ’cause a, apple is still the biggest position by far. Yeah. But you know, they’ve sold a ton of that. They sold a ton of Bank of America and it’ll be interesting to see how things go and it’ll be interesting to see if investors start to buy a lower Berkshire or continue to sell it.

[00:03:35] Doug McIntyre: Yeah