Berkshire Hathaway: Is the Stock Still a Safe Buy Without Warren Buffett?
Key Points
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Warren Buffett is no longer the CEO or chairman of Berkshire Hathaway.
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Under Greg Abel, the company appears to be taking on a bit more risk
Greg Abel took over as CEO of Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) this year, replacing Warren Buffett. The stock hasn’t nosedived and instead has continued to do well this year, rising by around 9% thus far. But with Buffett no longer at the helm, and Berkshire leaning more into tech stocks of late, has it become a riskier buy for the long haul?
Buffett’s role continues to lessen at Berkshire
Last month, Buffett stepped down as chairman of the company, further distancing himself from the business. His son, Howard, will take over the position and be the one to guard the company’s values and culture. The former CEO still believes the company is on the right track under Abel. But up until recently, Buffett and Abel were in close discussions; it appears that he’s going to be significantly less involved in the business moving forward, saying that, “Father Time always wins.”
While the culture and values may remain the same under his son, it’ll be Abel running the actual business. This creates a bit of uncertainty for investors, as Abel doesn’t have prior experience managing a portfolio of Berkshire’s size.
There have also been recent moves that appear to suggest the company is more willing to buy tech stocks, which can increase the overall risk and volatility of Berkshire’s portfolio. Buffett claimed to have initiated a position in Alphabet last year, but Berkshire has also added to its stake in the tech giant since then.
And a more recent, puzzling move was to take a stake in Bending Spoons, a tech company known as a serial acquirer. That’s a prime example of a stock that I wouldn’t have expected Buffett to ever buy.
Berkshire’s portfolio could look much different in the future
Alphabet has suddenly become one of Berkshire’s largest holdings. And while Bending Spoons is one of its smaller holdings, the move to invest in it is a notable one that investors shouldn’t overlook, as it highlights Berkshire’s potential appetite for both greater risk and tech exposure.
Without Buffett leading the business, there could be much more risk associated with owning the stock, particularly if Abel adds more tech investments to the mix. It’s still too early to tell whether that will be the case, but it’s an emerging trend worth watching.
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That is why, at least for the time being, I’d take a wait-and-see approach with the stock, as Berkshire’s portfolio may end up looking far different over the next few years.
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David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.