Warren Buffett, the CEO of Berkshire Hathaway for over 60 years, announced his retirement at the company’s annual meeting in Omaha, Nebraska, on May 3. The news caused shares to fall as much as 10.3% from their intraday highs of $812,855 for Class A and $539.80 for Class B, marked on May 2. Greg Abel, who is currently vice-chairman and CEO of Berkshire Hathaway Energy, is expected to take over when Buffett steps down on December 31.
Following the announcement, shares dropped nearly 5% on May 5, the first day of trading after the announcement, and have since continued to decline steadily. Despite a broader market rally helping to boost shares on Friday, the stock’s recovery has been slow, with only a handful of gains since Buffett’s announcement. Over this period, the shares have declined by 8.9% and 8.6%, respectively, while the S&P 500 Index has risen by 5.5%.
One reason for the stock’s decline might be investor uncertainty about Berkshire without Buffett at the helm. Buffett’s folksy demeanor and commitment to value investing have made him a folk hero to many.
Buffett retires, shares fluctuate
His investment strategy has substantially grown the company’s market capitalization to over $1 trillion. Buffett expressed confidence in his successor, Greg Abel, highlighting Abel’s energy and hands-on approach with subsidiary companies that require assistance. Another potential challenge for Berkshire could be internal, as Ajit Jain, head of the company’s vast insurance operations, is contemplating retirement.
The company retains its diversified holdings across various industries, including the Burlington Northern Santa Fe railroad, electric utilities, retail companies, Benjamin Moore paints, Dairy Queen, and Duracell batteries. Despite the current turbulence, the thorough succession planning and Berkshire’s diverse portfolio might help stabilize the stock in the long run. Investors will be keenly observing how the transition unfolds and whether Greg Abel can continue the legacy established by Warren Buffett.
The company’s inherent strength, diversified business model, substantial cash reserves, and experienced management team ensure its ability to weather various economic conditions. For long-term investors, Berkshire Hathaway remains an attractive option despite its current valuation. Although the company’s future without Buffett is a situation to monitor, his lasting influence, combined with capable leadership under Abel, indicates a promising outlook.
