Legendary investor Warren Buffett is retiring from his role as CEO of Berkshire Hathaway (BRK.A 0.37%)(BRK.B 0.32%) at the end of the year. At that point, Buffett's hand-picked successor, Greg Abel, will assume the helm and lead the massive holding company into a new era.
It looks like Buffett isn't the only leadership change at Berkshire Hathaway. Other notable changes include Todd Combs, one of Buffett's key managers, leaving the company to join JPMorgan Chase, and CFO Marc Hamburg announcing his retirement, effective June 2027.
These changes don't necessarily mean that Buffett's influence on Berkshire Hathaway's culture is fading. Still, it does drive home the point that change is inevitable, especially when an icon like Buffett steps down.
Berkshire Hathaway currently has $381.7 billion in cash on its balance sheet.
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Berkshire Hathaway could invest in tech stocks more than it has previously
It's widely known that Berkshire Hathaway hasn't invested very heavily in tech stocks over the years. Warren Buffett typically felt more comfortable in other market sectors, referencing what he called his circle of competence. Even Buffett's investment in Apple seemed more from the standpoint of a consumer products company than a tech stock.
Berkshire Hathaway's tech investments have increased as Buffett has given more authority to his staff in recent years. For example, when Berkshire finally invested in Amazon in 2019, Buffett noted that it wasn't he who bought the stock but one of his fund managers.
More recently, the company opened a nearly $5 billion stake in Alphabet, which, given Buffett's looming retirement, was probably not his investment either. It's hard to deny the importance of technology in modern society, and it's challenging to see how Berkshire Hathaway, at its colossal size, can avoid investing more of its capital in tech companies moving forward.
The company might finally pay a dividend
Buffett has consistently expressed his affinity for dividend stocks throughout his career. He has also been equally vocal about his disdain for the idea of Berkshire Hathaway paying one. Instead, Buffett has long preferred to retain Berkshire's profits and invest them in acquisitions or other opportunities.
It has not been easy to find places to invest all those profits in recent years. Berkshire Hathaway has been a net seller of stocks lately, and Buffett has pointed out the stock market's lofty valuation, as well as refrained from doing many share repurchases.
Now, as Buffett retires, he leaves his successor, Greg Abel, with a $381.7 billion question to tackle: What will the company do with all that cash? The pressure to take action will likely rise as the cash continues to accumulate.
NYSE: BRK.B
Key Data Points
Given the apparent lack of investment opportunities in today's market, a dividend just makes a ton of sense at this point. It could be something small and symbolic, even if it's just a way to share some of the company's profits with shareholders who are looking for reasons to hold the stock after Buffett steps down.
The stock has a higher floor but a lower ceiling
This leads into the final change, and that's the stock's upside moving forward. Berkshire Hathaway is a legendary stock because it has consistently outperformed the broader market for decades, transforming modest investments into substantial fortunes.
But with a $1 trillion market cap, Berkshire Hathaway's massive size is likely to work against it. Buffett himself predicted in his last shareholder letter that a handful of other stocks would outperform Berkshire Hathaway in the future.
The good news is that Berkshire Hathaway is a highly diversified juggernaut. Its subsidiaries and investments span the economy, including energy, manufacturing, insurance, and railroads, among others, and that's before getting into the cash reserves and additional billions of dollars worth of blue chip stocks the company owns.
If nothing else, investors can buy and hold Berkshire Hathaway, knowing that Buffett built the company to last seemingly forever.
