Berkshire Hathaway (BRKB 0.34%) (BRKA 0.46%) recently began a new era after longtime CEO and legendary investor Warren Buffett stepped aside and his successor, Greg Abel, assumed control on Jan. 1. It's an oddly uncertain time for Berkshire Hathaway, which has enjoyed decades of success, generating life-changing wealth for countless shareholders.
But it's fair to wonder whether things will change now that Buffett himself is no longer leading the charge at Berkshire Hathaway. Is the stock a buy now?
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Is Greg Abel preparing to make some moves?
It cannot be easy trying to fill Warren Buffett's shoes. Perhaps the most difficult challenge Greg Abel will face is striking that delicate balance between making his own choices and maintaining the culture and business model that Buffett built Berkshire Hathaway on. Thus far, the company seems to be mostly wrapping up its transition efforts.
For instance, Berkshire Hathaway kicked off the Greg Abel era by announcing it had completed its $9.7 billion acquisition of OxyChem from Occidental Petroleum, a deal struck in the fall. More recently, a regulatory filing revealed that the company may sell its 27.5% stake in Kraft Heinz, worth just over $8 billion. The troubled food conglomerate has sat in the company's portfolio for years, and it's just never worked out.
These aren't earth-shattering headlines, but they clear the decks, so to speak, wrapping up some unfinished business from Buffett's time as CEO and poising the company to do some newer and more exciting things. Berkshire Hathaway has been selling more than buying for its legendary stock portfolio for the past several quarters. Time will tell whether Berkshire Hathaway invests more aggressively in tech stocks under Abel. Buffett was famously averse to the tech sector.
NYSE: BRKB
Key Data Points
Struggling to find a reason to buy the stock now
One certainty is that Buffett left Berkshire Hathaway with a fortress balance sheet, including a staggering $381.7 billion cash hoard, which gives Greg Abel ample flexibility in managing the company. The company's various operating subsidiaries also performed well in the third quarter.
However, the stock currently trades at more than 1.5 times its book value, above its average over the past decade. Buffett himself would likely approve buying a fantastic company at a fair valuation, but Berkshire Hathaway, despite its many strengths, still faces some questions:
- What will Greg Abel's first significant move as CEO look like?
- What will Berkshire Hathaway do with all that cash?
- Can the company continue to grow as it has, given its massive size today?
Berkshire Hathaway is fairly valued today; it's not trading at some once-in-a-lifetime price. Investors probably shouldn't worry about Berkshire Hathaway under Greg Abel, but there isn't much reason to rush to buy shares, either. Consider exercising some patience and either looking for a better buying opportunity or waiting for a bigger catalyst to justify investing sooner.
