New Berkshire CEO Embraces Buffett’s Focus on Long-Term Value Amid Lackluster Earnings

Warren Buffett’s final year at the helm of Berkshire Hathaway is in the books. The 95-year-old’s successor says there’s more where that came from.

Greg Abel, who took over at the start of the year, promised shareholders in his first letter as CEO that the disciplined, value-focused culture built by his predecessor is as solid as an upturned Dairy Queen Blizzard. But Berkshire shares, which have lagged the S&P 500 for the past 12 months, fell 4.9% on Monday, as results from Buffett’s final quarter underwhelmed.

Handing Over the “Elephant Gun”

Berkshire’s full-year operating earnings, the company’s preferred profitability metric because it strips out investments and highlights core businesses, declined to $44.5 billion last year from $47.4 billion in 2024. The main reason was its insurance businesses, where underwriting profits fell nearly 20% to $7.3 billion and insurance investment income dipped 8% to $12.5 billion. Underwriting profits have softened across the industry amid increased competition in the property and casualty markets. “This likely means we will write less property and casualty business for a period of time,” Abel wrote.

There’s no doubt that Berkshire’s Abel era has prompted apprehension about the $1 trillion giant. After the old boss announced his retirement, analysts attributed a decline in shares to the end of the so-called Buffett premium, the term for investors’ willingness to fork over more cash knowing they were in the hands of a Wall Street legend. Abel assured investors in his letter that Berkshire won’t materially change the way it operates and invests as he wields his predecessor’s onetime favorite weapon:

• Berkshire is sitting on a near-record $373 billion of cash, which Buffett nicknamed the company’s “elephant gun” because it guaranteed the capacity to make big acquisitions or investments.
• Meanwhile, Berkshire’s energy, railroads, utilities, manufacturing, insurance and retail companies are relatively insulated from the AI fears that have roiled markets. So are its investment holdings in Occidental Petroleum (up 30% this year), Chevron (up 23%), and Coca-Cola (up 14.7%).

Literary Ambitions: It wouldn’t be a Berkshire shareholder letter if it didn’t have a smattering of folksy charm. While Abel’s letter played things straighter than Buffett’s missives, the new CEO noted that his old boss, who remains chairman, took inspiration from Ted Williams, arguably baseball’s greatest-ever hitter for his discipline in swinging only at pitches in a “happy zone.” Williams is second only to Babe Ruth in career slugging percentage, so that doesn’t rule out big swings.