This new year will mark the end of an era for Berkshire Hathaway (BRK.A 0.20%)(BRK.B 0.24%). Long-time CEO Warren Buffett retired from that position on Dec. 31, 2025, turning over the reins to Greg Abel. While Buffett plans to continue working for Berkshire, Abel will run the day-to-day operations.
I think 2026 could be a busy year for Buffett's successor. Here are two things I predict he'll do in his first year running Berkshire Hathaway.
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Berkshire Hathaway will initiate a dividend
Berkshire Hathaway has only paid one dividend during Buffett's tenure. Buffett joked that the board must have made the decision to pay that dividend in 1967 while he was in the bathroom. His preference has always been to retain the company's profits to reinvest them back into the business rather than pay dividends to shareholders.
That strategy has worked over the years. Buffett and his team have consistently identified attractive opportunities to invest capital. They've routinely acquired great operating businesses to expand Berkshire's platform, including Precision Castparts, BNSF, and Alleghany. Additionally, Berkshire Hathaway frequently purchases shares of high-quality, publicly traded companies. The company's investment portfolio is currently valued at nearly $310 billion and features notable names such as Apple, American Express, and Coca-Cola.
However, Berkshire Hathaway has found fewer opportunities to put capital to work in recent years. While the company agreed to buy Occidental Petroleum's chemicals subsidiary, OxyChem, for $9.7 billion in October, that was its first major deal since buying Alleghany Corporation for $11.6 billion in 2022. Meanwhile, Berkshire has been a net seller of stocks for the past 12 straight quarters. The company also hasn't repurchased any of its stock in the past five quarters.
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Key Data Points
As a result, Berkshire Hathaway has amassed a substantial cash position. It reached a record $381.7 billion by the end of the third quarter. Berkshire is currently generating interest income on this cash by investing it in T-bills (it currently holds more T-bills than the Federal Reserve).
However, with interest rates falling and Berkshire's cash position rising, investors will eventually demand that the company start returning some of this money to them. That drives my prediction that Berkshire Hathaway will initiate a dividend payment by the end of 2026.
Berkshire makes a bigger bet on tech
Warren Buffett has largely avoided investing in technology stocks throughout his career. He preferred to invest in companies that didn't change much. However, Buffett has softened his stance over the years. One of the company's more successful investments has been in Apple. Berkshire also recently purchased $4.9 billion worth of shares in Google's parent company, Alphabet.
I predict that Berkshire will buy more shares of tech companies in 2026. The industry is vital to the economy, especially in the AI age. The technology sector currently comprises about 35% of the S&P 500. Meanwhile, eight of the 10 largest companies by market cap are in the technology sector. Berkshire's decision to avoid the sector over the years has cost investors potential returns.
I expect Berkshire Hathaway to remain disciplined when investing in tech. For example, when Buffett's company bought shares of Alphabet, it traded at about 25 times forward earnings, a lower valuation multiple than Microsoft and Nvidia, which traded at 29 times and 30 times earnings, respectively, at the time. The company will likely seek opportunities to invest in a high-quality technology company when it trades at a more compelling valuation. While Alphabet's stock is no longer as cheap as it was when Berkshire first bought shares (it's currently over 29 times forward earnings), there are other potential opportunities these days. Meta Platforms is currently one of the cheapest large technology companies, with a valuation of about 26 times forward earnings, and may be an appealing option for Berkshire.
The dawn of a new era
I believe 2026 will be a year of change for Berkshire Hathaway under new CEO Greg Abel. I think that he will initiate a dividend and start investing more of the company's capital into the technology sector. These moves would put Berkshire in an even better position to produce market-beating total returns for its shareholders in the future.
