Holding the chair of Warren Buffet, the ‘Oracle’ of the investment world, is no less than a crown full of thorns. Berkshire Hathaway’s fourth quarter results were disappointing. Operating earnings fell to $10.2 billion from $14.56 billion. That means a decline of about 29%. Insurance business became the biggest pain. Underwriting profits fell 54% to $1.56 billion, from $3.41 billion a year earlier. Insurance investment income also declined 25% to $3.1 billion. Talking about the full year 2025, operating earnings declined from $47.44 billion to $44.49 billion. Overall, it’s a picture of declining earnings in Buffett’s final years, and new CEO Greg Abel is inheriting the same legacy. In his first letter to investors, Abel said that managing Buffett’s legacy is the most difficult job in the world. First test – The new CEO indicated to continue in big investments like Apple. In the annual shareholder letter released along with the results, CEO Abel answered many important questions, which had remained in the minds of investors since Buffett’s departure. First- Will the mountain of cash remain lying idle? Abel called it dry powder. That is, the capital which will be invested when the right opportunity comes. Clarified that Berkshire prefers investing in productive businesses rather than holding treasury bonds. Second- Will we get dividend or not? The answer was clear: no. Unless a dollar can be held and made into something worth more than one dollar, a dividend will not be paid. Third- Does the company intend to buyback shares? Abell said the buyback would take place only if the shares trade below their intrinsic value and the cash position of the company is not affected. Fourth – Who will look after the share portfolio? Abel took this responsibility upon himself. Fifth – What about Apple and big investments? Abell indicated there would be “limited activity” in major investments such as Apple, American Express, Coca-Cola and Moody’s. His assessment of Apple was that it would deliver ‘decades of compounded growth’. This is important because Buffett had reduced his stake in Apple in recent years. Sixth – New power: Double profits in Japanese companies. Abel said that Berkshire’s investment in five Japanese trading houses has more than doubled on paper. This is a victory for the strategy Buffett inherited from Abel and which he intends to carry forward. Expert View – Abel won hearts with the letter, but will have to demonstrate what he said. Cathy Seifert, analyst at global firm CFRA Research, gave the letter an A grade. According to him, Abel did what was necessary. It gave the message that Berkshire will remain what Buffett created. Bill Stone, CIO of Glenview Trust, called it extraordinary. Macrae Sykes of Gabelli ETF even gave it a “gold medal”. But Seifert’s warning is equally important. That is, “saying and doing are different.” Buffett’s legacy is in numbers. 19.7% annual compound return since 1965, nearly double that of the S&P 500. Total returns crossed 60 lakh percent. Abel has passed the first test of communication. But the real challenge is to deploy $370 billion of cash, get the insurance business back on track and break the trend of falling earnings by 2025.
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Abel wrote – Buffett’s legacy is the most difficult to handle: First result of investor Buffett’s successor and CEO of Berkshire; Earnings decreased by 29%
