There may never have been a smoother transition from an iconic CEO to a successor. Warren Buffett and Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) let markets know several years ago that Greg Abel would be Buffett’s eventual replacement. Abel is currently vice chairman of Berkshire’s non-insurance businesses.
Buffett officially said this weekend that he would step down and hand the reins to Abel at the end of the year. The announcement came as a surprise, even though investors had known to expect it. Berkshire shares tanked Monday on the news, dropping nearly 7% before paring those losses.
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Investors might be wondering whether they should be buying or selling Berkshire Hathaway stock now.
Image source: The Motley Fool.
Can Berkshire survive without Buffett?
Buffett was the key force in building Berkshire Hathaway into a trillion-dollar company. So it’s natural for investors to wonder about holding the stock when Warren Buffett is no longer the decision-maker. Today’s stock reaction is overdone, though. Buffett will be staying on as chairman of the board and isn’t even passing the CEO torch to Greg Abel until the end of the year.
Some investors may have wanted to have their money handled by Buffett himself. His investing philosophy is unique, and his results have been spectacular. That includes this year as Berkshire stock has greatly outpaced the S&P 500 index thus far.
On Saturday, at the 2025 shareholders meeting, Buffett said that not only will Berkshire survive, he thinks it will thrive under Abel’s leadership. Buffett said Abel would be even better than he at managing the company’s vast array of operating businesses.
Buffett made his name by being opportunistic. He poured billions into quality names during the Great Recession of 2008-2009. Investors should do the same with Berkshire stock, though even today’s drop doesn’t make shares a bargain. They trade at a relatively high valuation compared to recent years. Starting a position now could make sense, but wait for a bigger drop to dive in.
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Howard Smith has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.
