By: Benj Gallander
Published: May 23, 2025
Two years ago, we wrote about Berkshire Hathaway Inc. arguably being one of the most successful companies in history. This was soon after Benj went to the AGM for the second time – we went together about a decade earlier – and then Benj with his two lads.
His timing was propitious, as he wanted them to see Warren Buffett and Charlie Munger in action before it was too late. One did not have to be an actuary to prognosticate that they did not have much time left. When Mr. Munger died in 2023 at 99, it was not a surprise. Yes, sometimes an opportunity must be seized or it will simply no longer be available.
Mr. Buffett has decided to abdicate the CEO mantle at the end of the year and pass it on to Greg Abel, who has been with the corporation for more than two decades. He is a Canadian from Edmonton and, given his long stewardship at the enterprise, seems like a natural fit for the top position.
We see Berkshire very much like an empire, a huge, sprawling conglomerate whose power and reach compare to a mid-sized country. Mr. Buffett is something of the Augustus who established the realm during a long reign of strong growth. He and Mr. Munger spent decades in succession planning, instilling values of integrity and good business practice and institutional knowledge from top to bottom. Finally satisfied and elderly, Mr. Buffett is ready to pass the baton.
Mr. Abel is inheriting an exceedingly special enterprise. Berkshire owns insurance operations, utilities, pipelines, manufacturers and iconic consumer brands. And let us not forget its huge investment portfolio and nearly US$350-billion in cash.
The strong cash flow-producing businesses and massive monetary pile mean Mr. Abel could make a myriad of mistakes and the organization could buy its way through them. Odds are, given his extensive training, he will not do anything to jeopardize this corporation, which has a market cap of more than US$1.16-trillion. Yes, with a “T.”
Mr. Abel was a chartered accountant back in the day, became the CEO of Berkshire’s MidAmerican Energy subsidiary in 2008 and has been a board member since 2018, joining Berkshire as vice-chairman. He also has a bevy of companies on his resumé where he has been a director, including Aegis, Kraft Heinz, Nuclear Electric Insurance Ltd. and the Hockey Canada Foundation.
He seems eminently skilled to stickhandle the fabulous success Berkshire has had in the past into the future. Certainly he is not likely doing it for the money, as his net worth surpasses US$1-billion. That is minor league compared to Mr. Buffett’s, which is estimated to be almost US$160-billion. It would be lovely if he would adopt us or at least treat us to one of his go-to restaurants, McDonald’s. We do like McDonald’s.
Mr. Buffett likely views Mr. Abel’s independent wealth as very positive. According to Mr. Buffett’s essays, people who are independently affluent are less likely to make a decision based on their upcoming paycheque or to please someone and more likely to focus on the long-term and what is best for the business.
If Mr. Abel wants to set himself apart from the old management, one act he could do would be to pay a dividend, something Mr. Buffett and Mr. Munger eschewed. Few remember that, once upon a time, circa 1967, they did disburse one, but Mr. Buffett joked that he must have been in the bathroom when the dividend was declared.
Dividends would set Mr. Abel apart and show investors that there is a new gunslinger in town. It is unlikely from this angle that he will do a payout before Mr. Buffett dies, but after that, all bets are off, so to speak.
In 2018, Mr. Buffett did state that a dividend might be implemented in 10 to 20 years. If that happens, he is unlikely to see it. He is 94 years old after all.
Or perhaps once Mr. Abel is firmly established in the leader’s chair, a special payout would be the logical step – say, $10 a share. That would work out to around US$14-billion, which sounds like a lot of moolah, but it would hardly make a dent in the bankroll of almost $350-billion.
If the Buffett stock price premium does vanish, the odds of spin-offs increase too. This is because they can be a fabulous way to unlock value, especially for immense conglomerates such as Berkshire, which has lots of valuable, wholly owned subsidiaries and business units.
Currently the major sectoral holdings of Berkshire are financials at about 39 per cent, technology – which Mr. Buffett used to eschew – at 28 per cent, and consumer staples at 15 per cent.
Where might Mr. Abel be keen to invest? Utilities might be a front-runner given his history in the industry as president at CalEnergy. Plus, by their nature, corporations in this sector are often fairly conservative and can spin off lots of cash – attributes that are attractive to the Berkshire people. It would not surprise to see the enterprise make a major acquisition or two in this field.
Meanwhile, more is being added to the position in Constellation Brands along with Domino’s Pizza. Those two seem to complement each other, as the pizza can be washed down with a number of the enterprise’s myriad of beverages.
Would we buy the corporation now? Nope. With both the stock and markets near historical highs, it does not seem like the time. Conversely, one could argue that it rarely seems like a great occasion to buy this ticker, given normal investing metrics. But we still see lots of future potential. Sure, growth will slow down, but Mr. Buffett has harped on that for many years, due to the law of large numbers. It is really hard for huge empires to get that much huger. But as an engine of prosperity and stability, it has the capacity to potentially enrich shareholders for generations.
Benj Gallander and Ben Stadelmann are co-editors of Contra the Heard Investment Letter.