Warren Buffett leaves Berkshire Hathaway and the stock collapses

Berkshire Hathaway shares fell nearly 6% in early trading after this weekend's announcement: investment legend and the greatest investor of all time, Warren Buffett, announced he would step down as the company's CEO. The news came at the last minute of Berkshire's 60th annual shareholder meeting, which brought together some 40,000 people in Omaha, Nebraska.

Warren Buffett leaves Berkshire Hathaway

“Be greedy when others are fearful.” This has been one of Warren Buffett’s main mottos. The so-called Oracle of Omaha took control of Berkshire Hathaway in 1965, when it was a bankrupt textile company with shares trading below $20, and has since built it into one of the most valuable companies in the United States.

Just this Friday, Berkshire Hathaway’s Class A shares closed at a record $809,809, with a massive market value of $1.2 trillion, making it the eighth largest company in the United States. Its valuation is at its highest level in more than 15 years based on its price-to-book ratio, now around 1.8 times, compared to an average of around 1.5 times in recent years. Furthermore, since Warren Buffett took over, Berkshire Hathaway shares have increased 40,000-fold, representing an annualized return through the end of 2024 of 19.9%, compared to 10.4% for the S&P 500.

Many fund managers are terrified of a bad year. Buffett isn't. He had eleven, including four in his first ten years at Berkshire and a massive 49% drop during the Nifty Fifty crash in 1974.

Buffett's legend grew during the 2008 global financial crisis, when he opportunistically cornered investments in Goldman Sachs, General Electric, and Dow Chemical. He did so by accumulating cash in the run-up to the crisis, as he has done in recent years.

Another interesting fact is that the company doesn't pay dividends and only recently began buying back shares. Buffett relies on his track record to demonstrate that he can capitalize on shareholders' money with a better return than either the markets or the shareholders themselves would achieve.

How have Berkshire Hathaway's results been?

In 2025, Berkshire Hathaway shares are expected to rise 20%, compared to a 3.3% drop in the S&P 500 index. However, the company reported on Saturday its worst drop in quarterly operating profit since 2020 and noted "considerable uncertainty" surrounding international trade policies and tariffs.

First-quarter overall net income attributable to shareholders also fell 63.8% year-over-year to $4.6 billion.

The Omaha-based giant did not conduct any share buybacks in the first quarter. Its liquidity increased to a record $347.68 billion as of March 31, 2025, from $334.2 billion as of December 31, 2024.

Berkshire has a significant property and casualty insurance business, including Geico, the nation's third-largest auto insurer. It also owns the Burlington Northern Santa Fe Railroad and Berkshire Hathaway Energy, one of the nation's largest utilities.

The company's insurance business is divided into underwriting and investment decisions. Underwriting decisions are made by unit managers, while investment decisions are made by famed executive Warren Buffett.

In this context, Berkshire's insurance underwriting segment and its manufacturing, services, and retail businesses were the worst performers in the first quarter, while its investment income from insurance, railroad operations, and its energy unit performed well.

After-tax earnings in insurance underwriting, meanwhile, fell 48.6% year-over-year, due to after-tax losses caused by the Southern California wildfires, which amounted to approximately $860 million. Meanwhile, increased interest income from investments in U.S. Treasury bills contributed to an 11.4% year-over-year increase in after-tax earnings from insurance investment income.

Regarding the performance of the conglomerate's rail business, BNSF's quarterly after-tax earnings increased 6.2% year-over-year to $1.21 billion.

Who is Greg Abel, Warren Buffett's successor?

Current COO Greg Abel has been chosen to succeed Warren Buffett. In addition to serving as COO, Abel also chairs the Berkshire Hathaway Energy unit.

Gregory Abel was born in 1962 in Canada. He started in finance, transforming CalEnergy into a global company with 23,000 employees, starting from a small geothermal company of 500. He held a senior executive position from 1992 to 2008, after which he became CEO. In 1999, CalEnergy became MidAmerican Energy and, finally, in 2014, became part of the Berkshire Hathaway Energy holding company.

Currently, BHE operates national regulated utilities such as PacifiCorp and NV Energy, and Northern Powergrid in the UK. Abel was appointed vice president of non-insurance operations at Berkshire Hathaway in 2018, cementing his position as a possible successor alongside the conglomerate's vice president of insurance operations, Ajit Jain.

Now, after building one of the largest energy businesses in the United States, Greg Abel will try not to disappoint his mentor, Warren Buffett, while leading one of the world's largest companies.

Warren Buffett will hand over the reins of a $1.2 trillion giant to Abel, overseeing a portfolio of stocks like Apple and American Express, as well as a host of insurance, energy, railroad, and consumer companies that regularly generate $10 billion a quarter in operating profit. The 62-year-old executive will also inherit a host of questions, starting with what he will do with Berkshire's nearly $350 billion in cash after Buffett largely stayed out of the volatile markets of recent years.