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Shares Magazine
For six decades Berkshire Hathaway and Warren Buffett have been almost interchangeable. That changed when Greg Abel took over as CEO on 1 January 2026 after the board unanimously backed the Canadian’s appointment in May 2025.
Buffett finally cut ties with Berkshire in September 2026 when he officially retired, with his son Howard succeeding him as non-executive chair of the board.
Berkshire’s track record under Buffett is astounding, with growth in book value per share doubling the return of the S&P 500 index. That works out at an annualised return of 19.7% a year, turning $100 into $6 million versus $46,000 for the S&P 500.
It’s worth noting Berkshire’s returns are calculated after corporate taxes while the S&P 500 return is before investor’s personal taxes.
Nobody is expecting Abel to repeat that performance for the simple reason Berkshire today is a trillion-dollar operation which touches all parts of the US economy, which is a far cry from the modest textile business that Buffett started with in 1962.
Berkshire has operations which span insurance, freight rail, utilities, manufacturing services and retail.
What are the professionals saying?
One fund manager which has a long history of following Warren Buffett and holds shares in Berkshire is Sandford DeLand Asset Management which was founded by Keith Ashford-Lord in 2010 and runs the Buffettology Fund.
Ashford-Lord licensed the ‘Buffettology’ name from authors of the book with the same name, Mary Buffett and David Clark. Berkshire is one of the fund’s top holdings alongside Games Workshop and Relx.
Commenting on the succession of Greg Abel, David Beggs, fund manager of SDL Buffettology Fund told AJ Bell:
“Greg Abel doesn’t need to be Warren Buffett to do a very good job for shareholders. The law of large numbers makes it impossible for Abel to match Buffett’s record from this starting point.
“But Berkshire can still compound at high single digit to low double-digit rates and deliver attractive returns for shareholders. It has defensive characteristics with a significant cash position and an ‘old economy’ profile.
“This showed in October - Berkshire was up 9% while the Nasdaq 100 was down 7%. Since the AGM in May Berkshire is up 17% versus 5% for the S&P 500 and 1% for the Nasdaq 100.”
Early signs of cash deployment
At his first shareholder meeting Abel confirmed that Berkshire would retain its culture and decentralised operating model.
“We operate a decentralised model with autonomy grounded in deserved trust. We minimize bureaucracy to provide our managers the independence to focus relentlessly on their business,” wrote Abel in his first shareholder letter.
Abel will also need Buffett’s discipline to stick exclusively to compelling investment opportunities and resist the temptation to spend Berkshire’s $370 billion cash pile just because it acts as a drag on corporate performance.
The early evidence suggests evolution rather than revolution. Abel has resumed share buybacks after almost two years, which is interesting because Berkshire shares are trading close to all-time highs, suggesting his assessment of intrinsic value has also moved into new territory.
A more hands-on CEO
In June Berkshire agreed to buy US housebuilder Taylor Morrison for a total value including debt of $8.5 billion, marking Abel’s first major acquisition since succeeding Buffett.
This potentially tells investors more about Abel’s leadership style which is likely to be more ‘hands-on’ than Buffett.
Berkshire already owns Clayton Homes, one of the biggest housebuilders in the US, as well as housing-related businesses like Benjamin Moore and Johns Manville.
This suggests Abel will make more of an effort to knit together Berkshire’s sprawling empire to create greater operational integration.
An insight into Abel’s thinking might be glimpsed from his recent comments which put the Taylor Morrison acquisition into context: “Over time, we expect to unify our site-built homebuilding operations into a combined platform.”
Reshaping Berkshire’s stock portfolio
The most significant change to Berkshire’s portfolio of stock holdings in 2026 has been the purchase of Alphabet shares, which means the Google-owner has become Berkshire’s third largest holding, after Apple and American Express, representing around 12% the portfolio.
The shape of the portfolio has become a lot more concentrated with the number of positions being reduced from 42 to 29 with notable exits from long-standing holdings in Visa and Mastercard.
Berkshire re-entered the airline industry for the first time since 2020 after initiating a $5.4 billion stake in Delta Airlines, representing around 2% of the portfolio.
The four largest positions of Apple, American Express, Alphabet and Coca-Cola continue to dominate, accounting for roughly 60% of its overall holdings.
What is insurance float, how does it work?
Berkshire’s insurance float has provided an ever-growing pool of low-cost funding over decades which has become a key component Berkshire’s financial success.
Berkshire’s insurance operations like Geico collect premiums upfront, and the associated claims may not be paid for months or even years with certain forms of reinsurance.
During the intervening period Berkshire has custody of the money or ‘float’ which can be used to invest in Treasury bills, equities and other assets. It is crucial to understand that the float isn’t Berkshire’s money in an accounting sense as it is recorded as a liability on the balance sheet.
Nevertheless, Berkshire has use of the money and Buffett has referred to float as a cheap source of funding. The key insight which Buffett had is that when Berkshire’s insurance operations make an underwriting profit, the float is effectively free money.
If claims and expenses exceed premiums, float has a cost. But if Berkshire’s insurance operations are profitable over time (a combined ratio of under 100%), the effective cost of that funding can be zero or negative.
Over the last 25 years Berkshire has achieved an average combined ratio (premiums less claims and operating costs as percentage of premiums) of 92.2%, a remarkable underwriting achievement for a business of Berkshire’s scale.
This means Berkshire is not restricted to investing shareholder’s equity, with its insurance operations supplying an additional pool of investable funds.
How should you think about Berkshire as an investment?
Berkshire owns more than 50 businesses, touching many sectors and industries which is why it is often considered a bellwether for the overall economy.
But it is not useful to think of Berkshire as a run-of-the-mill conglomerate, but more as a giant capital allocation machine.
The insurance and wholly owned operating businesses generate cash which Abel allocates towards investments, acquisitions, reinvestments and buybacks.
A useful way to think about Berkshire from an investment perspective is to split the business into the sum of its parts.
This involves applying a multiple to the earnings of Berkshire’s operating businesses, then adding the value of its public equity portfolio and its cash and cash equivalents.
Operating businesses
Berkshire reported operating earnings of $44.5 billion in 2025, below the $47.4 billion in 2024, but above the five-year average of $37.5 billion, reflecting the resiliency of the business.
This includes the volatile insurance operations which achieved a combined ratio of 87.1% which compared favourably with the five-year average ratio of 90.7%. This ratio measures core operating profit after deducting claims and expenses from premiums earned.
Typically, investors have put a multiple on Berkshire’s operating earnings of between 12 times and 14 times, which implies a market value of between $534 billion to $623 billion, based on 2025 earnings.
The equities portfolio
The latest regulatory filings at the end of June show Berkshire’s portfolio had a market value of around $300 billion. Cash and equivalents at the end of the second quarter were roughly $365 billion. Together these parts of Berkshire add up to $665 billion.
If we take the middle of the multiple range (13 times) for the operating businesses of $579 billion and add the cash and equities portfolio, we get to $1.24 trillion of theoretical market value.
Taking the current market value of $1.2 trillion implies around a 2% discount to theoretical intrinsic value.
The fact that Abel has been buying back shares suggests his estimate of intrinsic value is above this rough and ready estimate of Berkshire.
It should be emphasised that the approach we have described is illustrative only and may not accurately reflect the underlying economics of Berkshire’s business.
How is Berkshire performing in 2026?
The company reported a 5.8% decline in the third quarter operating earnings to $12.7 billion, driven by a 43% fall in underwriting premiums and a drop in investment income, which more than offset a 13% increase in operating profits from Berkshire’s railroad, energy and manufacturing businesses.
Berkshire increased the cadence of share buybacks after repurchasing $9.6 billion in the third quarter and a further $2 billion in October, adding to the $4.8 billion purchased earlier in the year.
The $16.4 billion of repurchases is the biggest since 2021 when Berkshire repurchased $27 billion. Following the repurchases, Berkshire ended the September quarter with cash and equivalents of $359.9 billion, down from $380.2 billion six months ago.
Martin Gamble: Shares and Markets Writer
Martin Gamble is Shares and Markets writer at AJ Bell. He was previously the Education Editor of Shares Magazine. He has been with the business since 2019.
Martin graduated from the University of Kent in...