Berkshire Hathaway (BRK.B 1.15%) is an economic bellwether whose stock has more than doubled during the past five years. The conglomerate once again delivered strong earnings with insurance, real estate, utilities, energy, freight rail transportation, and other industries.
However, the company is undergoing a drastic change in leadership. Warren Buffett stepped down as the chief executive officer and has handed the reins to Greg Abel, who has been on the team since 1999.
Buffett will still serve as a chairman, but he will be less active in day-to-day operations. He was an essential part of Berkshire Hathaway's transition from a textile manufacturer to a trillion-dollar giant.
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Built to last without Buffett
Although Buffett has been Berkshire Hathaway's linchpin for decades, the company is built to last without him. Most of the companies under the Berkshire umbrella are in essential industries that don't see sharp demand fluctuations. Apple is a clear case study in how a company can continue to perform well even when its founding leader is no longer at the helm.
NYSE: BRK.B
Key Data Points
Buffett is a smart investor who has planned his succession for years, and he identified Abel as the man for the job in 2021. Abel is a veteran at the company who has had a bird's-eye view of how Buffett operates. But some investors may not believe it can achieve the same level of success with a different leader, and that uncertainty may present a buying opportunity.
Its key businesses are still growing, but they have to grow faster
Berkshire Hathaway makes most of its revenue from insurance and transportation. Its two largest segments -- insurance premiums and sales and service revenue -- were both up year over year in the third quarter. A continued upward trend for these segments can point to more gains for the stock.
However, the company must maintain positive growth instead of the third quarter being a fluke. Although insurance premiums earned were up slightly for the nine months ended Sept. 30, sales and services revenue was slightly down during that stretch.
Furthermore, the growth isn't that impressive for a stock with a 22.8 forward price-to-earnings (P/E) ratio. Overall revenue only increased by 2% year over year. Its key segments also saw slow growth. Revenue from insurance premiums only improved by 1.8% year over year, while sales and service revenue was up by 3.2%.
Berkshire Hathaway is a tremendous company, but its stock doesn't look good at current levels. Upside may be limited if the company can't reignite growth, especially with artificial intelligence stocks gaining the spotlight. Growth isn't enough to justify stock gains, especially when Berkshire's stock gains have outpaced revenue growth in recent years.
Sitting on cash has hurt Buffett
Buffett has been notorious for sitting on cash instead of putting it into the stock market. This strategy looks like pure genius during market routs like the one investors witnessed in 2022. However, Berkshire is sitting on $381.7 billion in cash, which feels like a missed opportunity.
If he had put that money into an S&P 500 index fund, which achieved a 17% return in 2025, it would have produced an added $64.9 billion. That type of return would have had a tangible impact on Berkshire Hathaway's results.
Buffett has also steered clear of most tech and artificial intelligence (AI) stocks during the rally, resulting in missed profits. Investors shouldn't expect Abel to put all of that money into the stock market. But if Buffett's successor is more willing to take risks, the company may end up rewarding shareholders with higher profits.
That large cash reserve can boost returns if it is used wisely. However, low growth rates and no public stance on how capital will be deployed during Abel's tenure leave some question marks. Investors can do better with other stocks, but Berkshire Hathaway is worth monitoring, especially if you are a value investor.
