Key Points
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The conglomerate’s cash stockpile is often cited as a reason to buy the stock.
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A change in leadership — as Warren Buffett passes the torch — is another.
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Berkshire’s new chief, Greg Abel, is already making his mark on the portfolio.
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Many investors view Berkshire Hathaway‘s (NYSE: BRKA) (NYSE: BRKB) massive cash reserves, which totaled $382 billion at the end of the third quarter, as one of the reasons to consider the conglomerate’s shares. Indeed, a company’s cash on hand and ability to grow that stockpile are valid motivations to consider a stock.
The good news is cash isn’t the only reason to consider Berkshire Hathaway today. As is widely known, Greg Abel took the reins as chief executive officer (CEO) upon Warren Buffett’s retirement. That succession plan was widely telegraphed and not surprising, but the change in leadership could be a catalyst for the stock.
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As Abel has just taken over, there’s still ample time for investors to evaluate the shares before the new head honcho makes his mark.
Leadership change could be a durable catalyst for shares of Berkshire Hathaway. Image source: Getty Images.
None of this is a knock on Buffett. He rightfully earned his place on investing’s Mt. Rushmore, running Berkshire for six decades. So a case can be made that the company can benefit from fresh perspectives. As one of my Fool.com colleagues recently noted, one of Berkshire’s greatest assets is flexibility. With all that cash and dozens of companies under its umbrella, Berkshire has plenty of levers to pull to drive change.
Abel is already displaying adaptability. Last month, Berkshire revealed in a regulatory filing that it’s moving on from its investment in Kraft Heinz, which will go down as one of Buffett’s rare gaffes.
Kraft Heinz is just one example, but the divestment indicates Abel is taking a more hands-on approach to Berkshire’s equity portfolio. Time will tell how things shake out, but it’s possible that under Abel’s leadership, mistakes won’t be given the long leash afforded to Kraft Heinz. There are already signs of increased fluidity as Berkshire reduced stakes in nine stocks in the fourth quarter.
That doesn’t mean that under Abel Berkshire is going to forsake long-term investing. Still, the company could become more nimble with its equity positions and umbrella companies, which could boost returns.
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Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
