Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, recently announced his plans to retire from his role as CEO by the end of the year. However, he will remain as chairman of the company. This news has caused a significant drop in Berkshire Hathaway’s stock price, with shares falling 10% between the announcement and June 30, compared to a 9.1% gain in the S&P 500 over the same period.
Despite this recent decline, Berkshire Hathaway has a strong track record of outperforming the market. From 1965 to 2024, the company’s stock has delivered a compounded annual gain of 19.9%, compared to the S&P 500’s 10.4% with dividends reinvested. Berkshire Hathaway’s resilience can be attributed to its diverse portfolio, which includes insurance businesses, ownership of the BNSF railroad, Berkshire Hathaway Energy, various manufacturing assets, and substantial positions in public companies.
Greg Abel is set to take over as CEO when Buffett steps down. Investors will be watching closely to see if Abel continues Buffett’s strategy of reinvesting profits instead of paying dividends. However, there is potential for a shift in policy under new leadership.
Berkshire shifts amid Buffett retirement
Berkshire Hathaway’s operating earnings provide a clear path to long-term growth. The company’s insurance underwriting and investment income have historically been strong, and its massive cash position allows for strategic acquisitions and expansion opportunities.
For investors considering buying Berkshire Hathaway stock, it is important to focus on the company’s operational strengths and competitive advantages, rather than viewing it solely as a vehicle for stock picking. With its robust asset base, steady operational earnings, and strategic cash reserves, Berkshire Hathaway remains a compelling choice for those seeking a reliable long-term investment. Despite stepping down as CEO, Buffett plans to remain actively involved in his business and philanthropic endeavors.
In an interview with the Wall Street Journal, he stated, “I’m not going to sit at home and watch soap operas. My interests are still the same.” Buffett also mentioned that he will be useful if there’s a panic in the market because he doesn’t get fearful when prices drop or when others are scared. Studies have shown that staying active and engaged in later years can have numerous health benefits, including a lowered risk of Alzheimer’s disease and a lower risk of dying.
Buffett serves as a role model for maintaining an active lifestyle in retirement, as he plans to continue working, assisting with investment decisions, and managing his philanthropic projects.
