Berkshire Hathaway’s Strategic Moves Under CEO Greg Abel
Berkshire Hathaway, under new CEO Greg Abel, invested significantly in the second quarter. The company spent $10 billion on Google’s parent company and repurchased roughly $4.5 billion of its own shares.
Berkshire, a conglomerate built by legendary investor Warren Buffett, reported its second-quarter earnings. The company revealed that its cash holdings declined to $365.5 billion, down from nearly $400 billion at the end of March. During this period, Berkshire added over $21 billion worth of various stocks to its portfolio. However, the specific stocks acquired will be disclosed in a filing later this month.
Greg Abel assumed the role of CEO in January, succeeding Warren Buffett, who retired after six decades but continues as chairman. Analyst Cathy Seifert of CFRA Research noted that the substantial share repurchase should encourage investors despite concerns about Geico’s performance. Geico’s underwriting profits fell by 45%, falling behind other major auto insurers.
Seifert highlighted two key positives for investors: firstly, the scale of share buybacks, unprecedented in recent years, and secondly, the 10% growth in quarterly operating revenue. In March, Abel announced Berkshire’s return to share repurchases after more than two years. Despite initial investor disappointment with only $234 million repurchased in the first quarter, the latest purchases signal a strong commitment to buybacks.
The company’s approach is to repurchase shares only if Abel and Buffett believe they are undervalued. This strategy does not involve setting a fixed amount for repurchases, unlike many other companies. Historically, Berkshire repurchased $78 billion worth of its stock between 2018 and 2024.
Besides investing in Google, Berkshire also completed a $6.8 billion acquisition of homebuilder Taylor Morrison, though this deal closed in July, after the second quarter.
Berkshire’s bottom line profit more than doubled to $25.667 billion, equating to $17,868.44 per Class A share. This increase was fueled by a substantial paper gain in the value of its investments, contrasting with the previous year’s $3.8 billion writedown in Kraft Foods stock. Last year, Berkshire reported earnings of $12.37 billion, or $8,600.89 per Class A share.
Despite these figures, Buffett has long urged investors to focus on operating earnings to gauge the performance of Berkshire’s diverse ventures. By this measure, the company’s operating profit rose to $12.983 billion, or $9,038.30 per Class A share, from the previous year’s $11.16 billion, or $7,759.58 per share.
Berkshire owns several major insurers, including Geico, a collection of significant utilities, BNSF railroad, and a varied portfolio of manufacturing and retail companies like Precision Castparts and See’s Candy.