Warren Buffett Has Stepped Down as Chairman of Berkshire Hathaway, but This May Be a Much Bigger Concern for Shareholders

Warren Buffett technically stepped down as Berkshire Hathaway (BRKA +0.28%)(BRKB +0.33%) CEO at the end of last year, with Greg Abel taking over. But Buffett’s still been closely involved with the company, and there have been reports that he and Abel work closely and have been in agreement on decisions.

Recently, however, Buffett announced he is stepping down as the company’s chairman as well. The move seems to suggest Buffett is further distancing himself from Berkshire Hathaway. The biggest concern for investors, however, isn’t necessarily that Buffett is leaving, but that this will be more of Abel’s company going forward, which will introduce some risk and uncertainty ahead.

The real test for Berkshire begins now

When Buffett stepped down from CEO, he wasn’t all that far away from the business. But now, stepping down as chairman as well and having his son, Howard, replace him, seems to suggest there will be much more distance moving forward. The company will inevitably have more of Abel’s fingerprints on it, with Buffett no longer exerting a strong influence.

Buffett has been involved with some of the biggest moves for Berkshire in recent years, including buying shares of tech company Alphabet last year. Todd Combs, who has since left for JPMorgan, was also in charge of managing Berkshire’s equity portfolio in the past.

Abel, who hasn’t had any formal experience managing a portfolio previously, looks to now be the point person moving forward on such decisions, with presumably less or no involvement from the company’s old CEO. For investors, it raises questions about the business’s path forward and what major changes, if any, will occur in the company’s portfolio.

Why Berkshire’s stock may struggle in the near term

So far this year, Berkshire’s stock has been flat, and it has underperformed the broader market, with the S&P 500 up over 13%. There’s been some hesitancy to invest in Berkshire, and that may very well continue at least until Abel proves himself in the eyes of investors. While Buffett has full confidence in him, there will inevitably be question marks and concerns about how strong the business will be under Abel. News of Buffett still having close involvement in the business this year may have only exacerbated those concerns, at least in the near term.

Berkshire, with a market cap of more than $1 trillion, may suddenly look like a much riskier stock to own. While it’s still managed with Buffett’s principles, investors may be tempted to take a wait-and-see approach with the stock for the time being.