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Berkshire Hathaway (NYSE:BRK.B) might not be the same without the Oracle of Omaha in the corner office. And while the great Warren Buffett has retired, I still think it makes sense for Berkshire shareholders to stay the course, as the investment legend’s values will probably make the conglomerate continue to do well, not only over the next 10 years, but perhaps over the next 100 and beyond.
Indeed, Berkshire Hathaway was built to last, and while there are sure to be a few nervous investors who overestimate the challenges faced by the new CEO, Greg Abel, I think that the biggest Buffett bulls should play the long game and continue to find moments to be a bit greedier at times when there’s great fear in the hearts of other investors. While it’s going to be tough to find a star stock picker that can top Buffett, I do think that giving Abel and his team the full reins could come with significant benefits as well.
Moving on from Kraft Heinz
While Abel is just under a month into his term as Berkshire Hathaway’s CEO, his team has certainly not wasted time making a move that, in my opinion, should have happened a long, long time ago. Of course, I’m talking about the paring of the stake in shares of Kraft Heinz (NYSE:KHC) or, at the very least, setting the stage for a steady offloading of the stake “from time to time.” Of course, the timing of selling shares is uncertain at this point, given it’s pretty much “on the shelf,” but one has to think that Abel could be in a great spot to deploy much, if not all, of the proceeds into better opportunities.
Undoubtedly, Kraft Heinz was a rare fumble for Berkshire under the Buffett era, and the firm seems to have held onto the struggling condiments play for a tad too long. Things have only gotten worse in the past few years, with shares of Kraft Heinz continuing to sink by around 46% from its 2022 highs, putting the name down more than 75% from its 2017 all-time highs.
And with talks of a spin-off, something that Buffett previously voiced disapproval of, perhaps it was time to take a bold move by moving onward from the soured ketchup investment. Of course, it’s going to take time to turn the tide over at Kraft Heinz. But, then again, Buffett and Berkshire have given the firm more than enough time since the initial implosion around eight years ago. With the firm back on the canvas again, perhaps being patient isn’t enough in what some would consider to be a value trap.
Indeed, capital allocation is now in Abel’s hands. And as he looks to follow Buffett’s teachings while also leaving his own personal mark, I think it’s a very exciting time to be a new Berkshire Hathaway shareholder. In any case, there’s a massive pile (more than $380 billion) to put to work should the right opportunity arise that Abel thinks is worthy of a big swing.
Greg Abel is now the star of the show.
Moving on from Kraft Heinz should be music to the ears of Berkshire Hathaway shareholders. That said, moving on from Sirius XM Holdings (NASDAQ:SIRI), I think, might be another wise move, especially with around 1 million subscribers leaving between 2023 and the third quarter of last year. Of course, there’s still a lot of free cash flow to be had and deep value if subscribers don’t completely fall off a cliff.
The stock does look like a steal at 4.9 times trailing price-to-earnings (P/E). But, like Kraft Heinz, Sirius XM might be a long-time laggard that’s starting to become more like a “cigar butt” than a wonderful business. Whether or not Abel continues his Spring cleaning of underperformers within the public market portfolio, it’s going to be an exciting moment when Berkshire unveils its latest long positions with Abel as CEO.
Could we see more buying of wonderful winners, like Alphabet (NASDAQ:GOOGL), and perhaps an elephant-sized deal that shareholders have been waiting for? Time will tell. Either way, it’ll be a fascinating ride for shareholders with Abel now in control of the wheel. I think he’s a brilliant manager who will prove a worthy successor to Buffett.
Only time will tell. Either way, it will be interesting to see how Abel fares at this year’s Berkshire Hathaway shareholders meeting with just Ajit Jain to his left. Even without Buffett at the microphone, I think there will be a pretty good turnout and plenty of good questions.