Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), one of the world's largest conglomerates, has made beating the broader stock market a habit, generating market-crushing returns for six decades.
However, this year, Berkshire faced a new challenge: preparing for a significant transition. Warren Buffett, the legendary leader of Berkshire, announced that he would step down as chief executive officer at the end of 2025. Buffett will remain as chairman of the company's board, while Berkshire veteran Greg Abel will become the new CEO.
Berkshire's shareholders have never seen a Berkshire Hathaway without Buffett at the helm. Uncharted territory lies ahead. Is Berkshire Hathaway stock a buy now?
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Changing tides, same business
Not only is Buffett stepping down, other changes are taking place within management. Berkshire's longtime chief financial officer, Marc Hamburg, will retire in 2027 after being at the company for four decades. Hamburg is believed to be one of the more underappreciated leaders at Berkshire. Todd Combs is also leaving the company. Combs was CEO of GEICO, and he also helped manage 10% of Berkshire's massive $312 billion equities portfolio. We also can't forget that Berkshire's vice chair, Charlie Munger, one of Buffett's closest confidants, passed away in 2023.
Make no mistake, the Berkshire that people knew is now gone, and like it or not, Abel is going to have an intense spotlight on him as he tries to fill arguably the biggest shoes in the financial world.
But amid all the changes, Berkshire's business remains the same, and Buffett is leaving it in a very strong position. In 2024, Berkshire generated nearly $89 billion in net earnings. However, shareholders should note that a significant portion of this amount stems from unrealized investment gains in Berkshire's large equities portfolio, which can fluctuate substantially from year to year due to market changes.
NYSE: BRK.B
Key Data Points
Still, in 2024, Berkshire's insurance businesses generated more than $22 billion of earnings. Berkshire also operates many diverse business lines, including Berkshire Hathaway Energy, the Burlington Northern Santa Fe Railroad, and other large companies in the manufacturing, service, and retail sectors. Berkshire's huge equities portfolio owns a wide variety of well-established companies in different industries.
Finally, at the end of the third quarter, Berkshire's cash, cash equivalents, and short-term investments in U.S. Treasury bills totaled more than $377 billion, creating a fortress balance sheet and large buffer of safety. Berkshire now owns more than 5% of all U.S. Treasury bills.
A great business that will never be the same without Buffett
It's true that Berkshire Hathaway will never be the same without Buffett as CEO, and I'm sure Abel would acknowledge that and also say he has no intention of trying to replicate the investment syle of the Oracle of Omaha.
Still, Berkshire is a very unique business that is unlikely to ever be rivaled. The company provides investors with a safety because it's a large company with several strong businesses in diverse sectors. It has an impregnable balance sheet that isn't heavily reliant on artificial intelligence. Berkshire also owns numerous energy assets and stocks, which typically prove to be a unique form of diversification in the long term.
Over time, Abel and the rest of the management team, who are all more than capable, will be able to build even more credibility. Currently, Berkshire's stock trades at nearly 185% of Berkshire's tangible book value, or net worth. Tangible book value is essentially tangible common equity, which is a company's shareholder equity minus intangible assets and goodwill. It's a common metric that investors use to value bank and insurance stocks.
Berkshire's 10-year average price to tangible book value is 196%, so I think investors can buy the stock now, given the durability of a business that should continue to deploy capital prudently and earn good returns for shareholders.
