Next year, Berkshire Hathaway will have a new CEO. Warren Buffett, who has been in charge for decades, is stepping down and Greg Abel will be taking over. It's a monumental shift for the business, and while there may not necessarily be drastic changes in the day-to-day operations, there could be some adjustments to Berkshire's holdings.
There are three stocks that I think Abel should consider adding to Berkshire's portfolio once he takes over: Microsoft (MSFT 1.22%), Enbridge (ENB 1.96%), and Nvidia (NVDA 1.45%). Here's why these stocks are great long-term investments and why they fit the Berkshire mold.
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Microsoft
Buffett distanced himself from Microsoft because of his close association with co-founder Bill Gates. But with Buffett no longer at the helm, it opens the path for Berkshire to create a position in Microsoft under Abel.
Microsoft is the type of business that checks all the boxes for Berkshire. It has solid fundamentals, many growth opportunities, and a strong brand that is known all over the world, giving it a fantastic competitive moat.
In the trailing 12 months, the software company generated more than $270 billion in revenue, amassing nearly $97 billion in profit along the way. Microsoft is a leading company in artificial intelligence (AI) and cloud computing, and its office software is a staple in many businesses around the world. This is an excellent stock for investors to own for the long haul, and I think it may just be a matter of time before it finds its way into Berkshire's holdings.
Enbridge
With Abel being from Canada and having strong roots in Alberta, I think he'll be inclined to put his stamp on Berkshire. And what better way to do so than by opening up a position in a top oil and gas company from Canada -- Enbridge. Berkshire is no stranger to the sector and holds multiple stocks from there.
Enbridge is known for its consistency and long-term dependability, which is why it also looks like a model Berkshire-type investment. This year, the company expects to meet or exceed its financial guidance, and if it does, it'll be the 20th consecutive year that Enbridge has done so. Few companies can generate that kind of consistency. And Buffett has always valued predictability and stability in businesses.
The pipeline company generated revenue totaling just under 61 billion Canadian dollars over the trailing 12 months. And with Enbridge closing on multiple acquisitions in the U.S. within the past year few years, its financials could look even better in the future. Along with an attractive dividend that yields nearly 6%, this is a stock that can be ideal for any type of long-term investor. Enbridge is another stock I expect may be a staple in Berkshire's portfolio once Abel is at the helm.
Nvidia
For years, iPhone maker Apple has been the top holding in Berkshire's portfolio. But the company has arguably been losing its luster due to a fumbled AI rollout and delaying key features on its latest phones. And it highlights much more than that: a lack of innovation. At the very least, it's lagging behind its key rivals.
A changing of the guard may be overdue at Berkshire. While Buffett has long been a fan of Apple's business, Abel may see an opportunity to change that up. Investing in Nvidia is a move that could make much more sense. Even for people who are unfamiliar with AI, investors have come to know about Nvidia's dominance in the chip world, and I believe it now has the strong brand that Apple once did, which is synonymous with innovation.
Nvidia has dominant market share in the AI chip market, and its fundamentals are incredible. Over the past four quarters, it has net a profit of $77 billion on revenue of nearly $149 billion. Given its impressive market position and huge profit margins, it seems unfathomable that the stock isn't in Berkshire's portfolio already. I can only assume that it's because Buffett may not want too much exposure to tech or that he's simply too unfamiliar with it.
For Abel, however, this can be yet another opportunity for him to change up Berkshire's holdings with more growth-oriented businesses. While Apple may have performed well over the past decade, it may no longer make sense for it to be Berkshire's top holding. Nvidia could be a much better fit.
