He finally did it. After 60 years at the helm and 75 as a professional investor, Warren Buffett has announced his plan to step down as CEO of Berkshire Hathaway (BRK.B 1.13%) by the end of 2025. Vice Chairman Greg Abel, current leader of the operating subsidiaries division, will step in as the leader of one of the top 10 largest companies in the world by market cap at the end of the year.
It has been quite the ride for Buffett and Berkshire, making this tiny textile manufacturer into one of the largest companies in the world with sprawling operations in insurance, energy, railroads, and a large stock portfolio. What comes next for Berkshire Hathaway? Here’s how the company will operate once Buffett steps down and what it could mean for the stock going forward.
Divide and conquer
Unsurprisingly, Buffett has been setting up his succession planning for over a decade now. At 94 years old and in charge of a sprawling conglomerate and tens of thousands of employees, Buffett chose to do the only prudent thing.
For many years, Berkshire Hathaway’s operations have been helped by vice presidents under Buffett’s CEO umbrella. These include Abel, who is currently in charge of the wholly owned operating subsidiaries, such as the BNSF railroad and Berkshire Hathaway Energy, which generated $5 billion and $3.7 billion in earnings, respectively, in 2024. Other controlled businesses like See’s Candies remain under Abel’s direction but are typically run with little oversight by managers as long as profits remain positive. This structure should not change once Abel takes over as CEO.
But that is not all the Berkshire Hathaway conglomerate owns. There is the investment portfolio (more on that in the next section) and the insurance operations, which is the crown jewel of the business and managed by Ajit Jain, whom Buffett has called the best insurance underwriter in the world. The insurance subsidiaries generated $9 billion in underwriting profits and $13.7 billion in insurance-investment income in 2024, making them vastly important to Berkshire Hathaway’s operations. Jain is set to remain in charge of the insurance portfolio after Buffett retires. No changes are going to occur for these divisions after Buffett leaves.
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Managing the investment portfolio transition
One of the beauties of Berkshire Hathaway was Buffett’s ability to take insurance premiums and subsidiary operating profits and invest them intelligently in the stock market. It is a wonderful combination to have one of the best insurance underwriters in Jain and perhaps the best stock investor ever in Buffett working for the same company. This is how Buffett was able to acquire 5% of Apple stock and make over $100 billion in gains for shareholders, saying at the last shareholder meeting that Tim Cook made more money for Berkshire Hathaway than Buffett himself.
Berkshire Hathaway’s two other stock investors are Todd Combs, who joined the company in 2010, and Ted Weschler, who joined in 2012. It is likely that the pair will have the capital-allocation decisions when it comes to managing this portfolio of stocks that include American Express, Coca-Cola, and Apple. Weschler and Combs have great track records, with Weschler turning his $70,000 retirement account into over $250 million (not a typo) from 1989 through 2018. Not a bad track record for taking over this immense portfolio for Berkshire Hathaway.
One question remains: How much of Berkshire Hathaway’s dry powder of over $300 billion in cash will be available for Todd and Ted to invest? This decision used to be made by one person (Buffett), but the head CEO is now Abel. Will Weschler and Combs have to request funds to invest from Abel? Understanding this relationship will be key for investors who continue to hold Berkshire Hathaway after Buffett retires.
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What comes next for Berkshire Hathaway
Even though Buffett’s retirement is a big loss for Berkshire Hathaway, the truth is that Berkshire Hathaway will operate more or less the same after he leaves. This is a moment he has been setting up for over a decade, and he knows from experiencing decades of business history that it is not something you take lightly.
Jain will still run the insurance operations. Abel will be in charge of BNSF and Berkshire Hathaway Energy. All three of these divisions can utilize capital to reinvest for growth. The investment portfolio will now be run by Combs and Weschler. They have solid track records and have been learning from Buffett for over a decade now.
At a market cap of $1.1 trillion today, Berkshire Hathaway is not going to generate the miraculous returns over the next few decades that it has in the past under Buffett. The law of large numbers is not going to let this happen. However, it can still be a solid stock to own and a bedrock of financial conservatism that will last through market cycles. Buffett made sure he will leave investors in good hands when he officially steps down as CEO.
American Express is an advertising partner of Motley Fool Money. Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.
