Berkshire Hathaway’s Stock Price Problem Gets Worse
Greg Abel inherited one of the most cash-rich companies on earth, yet Berkshire Hathaway sits flat while the S&P 500 surges ahead. Something has to give, and the window for Abel to prove himself is closing fast.
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Maybe it is because Warren Buffett stepped down as CEO of Berkshire Hathaway (NYSE: BRK-B | BRK-B Price Prediction) at the end of last year. Maybe his replacement, Greg Abel, is not up to the job. (Buffett stepped down as Chairman recently, but that is too recent to affect Berkshire Hathaway’s stock, which is flat this year, while the S&P 500 is 13% higher. Every day, the distance between those two numbers stays about the same or worsens. And the end of the year, a natural time to judge management, is not that far away.) Many people thought that another senior executive, Ajit Jain, should have gotten the job.
What happened? Berkshire has nearly $360 billion in cash on its balance sheet. But Buffett had nearly as much and did little with it. Observers argue that Berkshire’s investment in companies like Alphabet (NASDAQ: GOOG) is an AI proxy, and its energy investments are sort of an investment in AI data centers. Both of those observations are a stretch.
Berkshire’s stock won’t move unless Abel does something big. Shuffling around holdings in public companies won’t do it. Berkshire is too big for any single large or increased holding to shock the market into buying Berkshire stock.
Berkshire has always favored steady earnings and powerful brands. Costco (NASDAQ: COST) has a market cap of $408 billion. Bank of America (NYSE: BAC) has a market cap of $375 billion. Coca-Cola (NYSE: KO) has a market cap of $288 billion. Abel could buy them without taking on too much debt.
Abel, take some risk. Get that Berkshire stock up.
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Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
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A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
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