Greg Abel’s first Berkshire letter pledges no major operating changes

Greg Abel signals continuity after Buffett as Berkshire charts its next chapter

Greg Abel, who is taking over as CEO of Berkshire Hathaway, used his first shareholder letter to pledge continuity with Warren Buffett’s approach, praising Buffett while telling investors Berkshire will not retreat from investing or make significant changes in how the conglomerate operates.

In the letter, Abel said he would “always maintain Berkshire’s financial strength,” and he cautioned investors not to read the company’s cash balance as a sign it was stepping back from opportunities. He said the cash figure reflects readiness rather than hesitation, describing it as “dry powder” that helps Berkshire move when others are “tentative or fearful,” and to stand firm when “financial storms roll through,” according to the Associated Press report on the letter.

Abel also laid out limits on what Berkshire would buy. He said Berkshire would avoid buying any businesses that “undermine the fabric of society or could jeopardize Berkshire’s reputation,” though the letter did not spell out which specific kinds of companies that standard might exclude, the AP reported.

The letter arrived against the backdrop of a transition that investors are monitoring for changes in Berkshire’s investment posture and leadership style. The AP reported that CFRA Research analyst Cathy Seifert said she wondered whether Abel would consider AI companies in the category of businesses that “undermine the fabric of society.” Another investor, Adam Mead, said Abel’s tone matched what investors had wanted from the change in leadership, describing Abel as having Buffett in mind as he wrote the letter.

Abel acknowledged the challenge of following Buffett, saying, “Warren is obviously a very hard act to follow,” and he did not attempt to mirror Buffett’s wit, the AP reported. Abel also discussed major holdings, including Apple and American Express, and he described how Berkshire had more than doubled its money on paper through investments in five Japanese trading houses.

At the same time, Abel addressed investment pain in parts of the portfolio, including a $4.5 billion write-down tied to Berkshire’s stakes in Kraft Heinz and Occidental Petroleum. The AP report also said Abel described Berkshire’s other investment manager, Ted Weschler, as handling only about 6% of the portfolio, with the rest falling under Abel’s responsibility—an element some analysts and investors found notable given Abel’s background.

Berkshire’s results in the quarter reflected both gains and write-downs. The AP reported that a paper gain on Berkshire’s investments kept the company’s bottom-line net income at $19.199 billion in the fourth quarter, close to the previous year’s $19.69 billion. But Berkshire has long emphasized that operating earnings offer a better measure of performance because they exclude investment gains and losses that can skew results when the company is not selling most of its stocks.

Using that operating earnings framework, the AP reported that Berkshire’s operating earnings fell nearly 30% to $10.2 billion, or $7,092.09 per Class A share. FactSet analysts’ estimates cited by the AP put operating earnings at $8,259.23 per A share.

Beyond the numbers, Abel pointed to operational priorities inside Berkshire’s companies. The AP reported that Abel praised companies such as Geico and Precision Castparts, while saying BNSF needs to improve because its profits lag behind other railroads and that utilities face risks tied to wildfire liabilities. Abel said PacifiCorp would pay damages when it is responsible, but would continue to fight lawsuits in fires where its equipment did not start the blaze, according to the AP summary of the letter.

On capital returns and shareholder engagement, the AP reported Berkshire did not repurchase any of its shares in the fourth quarter and that Abel told shareholders not to expect quarterly commentary, citing Berkshire’s long-term approach. Seifert said she appreciated the letter’s “factual approach,” and she added that Abel was coming into the role from “a much different perspective,” with responsibility for running the business rather than building it.

Looking ahead, Abel and Buffett have said there are not expected to be significant changes in how Berkshire operates, the AP reported. Buffett remains chairman and the largest shareholder, continuing to help guide the Omaha, Nebraska-based company even as Abel takes on the annual letter writing that many investors follow.

The AP report said Abel announced some changes for Berkshire’s May shareholder meeting. The first question-and-answer period will feature Abel with Ajit Jain, Berkshire’s vice chairman for insurance, and the second panel will include Abel answering questions with BNSF CEO Katie Farmer and NetJets CEO Adam Johnson, who now oversees Berkshire’s consumer, service and retail businesses.

The only initial changes so far, according to the AP report, include administrative moves Abel made as he took over and a January filing suggesting Berkshire may consider selling some or all of its 325 million Kraft Heinz shares. The AP said Buffett may have supported such a move based on earlier comments about Berkshire’s purchase price for Heinz and criticism of packaged-food plans that would split the company into two, while the broader portfolio includes well-known brands such as Dairy Queen and See’s Candy alongside operating companies that supply other industries.