It’s Warren Buffett’s Last Month at Berkshire. Should Investors Buy Before the Big Transition?

This is it. It’s Warren Buffett’s last few weeks as CEO of the legendary Berkshire Hathaway (NYSE:BRK-B), and while many investors have had many years (even decades) to think about a post-Buffett conglomerate, only time will tell how the shares fare as incoming CEO Greg Abel takes control.

Undoubtedly, it was a magnificent run for Buffett, one that’s unlikely to ever be matched. And while Abel has some massive shoes to fill, I do think Berkshire Hathaway might be able to get a second wind, so to speak, especially as markets wander into a new era of heftier valuation multiples and a business landscape that will be forever changed by artificial intelligence (AI).

Of course, the final month for Berkshire under Buffett could prove turbulent, especially as some investors get a tad more nervous that the day is quickly approaching. It’s one thing to anticipate Buffett’s departure from the CEO’s office, but it’s another when the time finally comes.

Though Buffett will still be ready to chime in once opportunities arise (his investing expertise in tough markets is arguably a top reason why shares of Berkshire Hathaway should retain some of their Buffett premium), one can’t really fault long-time shareholders for selling before Buffett hands things over to Abel.

In many ways, Abel looks set up for success from the get-go, with a pile of cash and numerous businesses that are just humming along. And let’s not forget about the sales and margin-enhancing potential of AI technologies. Undoubtedly, Buffett and Berkshire used to shy away from technology, but the times are changing.

Abel and the AI age could be big for Berkshire Hathaway as it aims to find value where it can

Arguably, Berkshire has become better at swinging at the tech fastballs thrown at them. Whether that’s the legendary Apple (NASDAQ:AAPL) investment made nearly a decade ago or the more recent Alphabet (NASDAQ:GOOG) bet, which, I believe, seems to scream that there is real value to be had from the AI revolution, Berkshire is ready for a new era and I do think it has what it takes to crush the S&P 500, not just over a short duration, but over the long run.

Buffett’s lessons and values may very well live forever at Berkshire. And as Buffett’s successors look to adapt Buffett’s philosophy for the AI age and beyond, questions linger as to whether Berkshire’s approach can work as a new transformative technology arrives. 

Understandably, it’s a difficult balance to seize AI growth opportunities while also insisting on value and a fat margin of safety. That said, in the case of Alphabet, I do think Berkshire has gotten both (value and generational growth) with one bet. As AI proves more monetizable for specific industries such as retail and insurance, you can bet that Berkshire will be ready to place smart bets on AI to improve its business. Perhaps it’s management’s AI-savvy that might still be underestimated, as the final few days for Buffett as Berkshire’s CEO approach.

Star investor Todd Combs is leaving as well. That’s weighed on the stock

With Todd Combs, a star investor at Berkshire (the “Todd” in “Ted and Todd”), reportedly departing Berkshire Hathaway, there’s no question that the transition into the Abel era might be a bit more turbulent. Todd Combs is a big name who was responsible for many massive wins over at Berkshire.

While it’s unfortunate that Buffett and Combs are departing, I do think that investors might wish to view any pullbacks as an opportunity to do some buying. Of course, there will always be that question as to whether there will be more big-name departures to follow as Buffett retires. That’s a big risk that might weigh down shares of Berkshire Hathaway, which are now trailing the market year to date, into year’s end.

The stock fell 1.4% on the news of Combs’ departure, making it an even more uneasy time as Berkshire looks to ring in a new year and the start of the Abel era, which, I think, will be solid in its own right.