Berkshire Hathaway Stock Dips With Legendary CEO Stepping Down

Berkshire Hathaway Inc., the conglomerate currently led by Warren Buffett, has hit even more headlines over the weekend, as the legendary investor has confirmed his intention to step down as CEO, with Greg Abel named as the intended successor.

Berkshire Hathaway’s stock looks set to start the session negative, with the price currently trading down 2% in the pre-market. Despite this minor pullback, the stock has demonstrated remarkable stability amid broader market fluctuations. Over the past three years, BRK-A has delivered a 65–66% return, outperforming the S&P 500’s gains, while its five-year return of 191% underscores its long-term appeal.

Technical indicators reinforce the bullish sentiment: BRK-B trades 9% above its 20-day simple moving average and nearly 13% above its 100-day SMA, signaling strong institutional buying and the potential emergence of a “golden cross” pattern.

Analysts highlight Berkshire’s $334 billion cash reserve as a critical factor, enabling opportunistic acquisitions during market dips. This “war chest” positions the company to capitalize on undervalued assets, a strategy central to Buffett’s legacy.

Strategic Investments and Portfolio Adjustments

Berkshire’s Q2 2024 13-F filing revealed new stakes in homebuilders DR Horton, Lennar, and NVR, signaling confidence in the U.S. housing market’s recovery. This aligns with Morningstar’s forecast of a 2024 rebound in housing starts, driven by lower mortgage rates. Additionally, Berkshire increased positions in Domino’s Pizza (86% stake growth) and Pool Corporation (48%), though these represent less than 0.4% of the portfolio.

Apple Inc. remains Berkshire’s largest equity holding, contributing significantly to recent gains. However, concentration risk persists, with top holdings like Apple and Coca-Cola accounting for over 40% of the equity portfolio.

UBS analyst Brian Meredith raised BRK-B’s 12-month target to $606 (14% upside), citing GEICO’s resilience and buyback potential. For BRK-A, forecasts suggest a 2025 year-end price of $832,393 (3.98% gain), with long-term targets reaching $1.18 million by 2030. These projections assume stable macroeconomic conditions and disciplined capital deployment.

🟩 The Bull Case for BRK-A

• Exceptional balance sheet with $189–$334 billion in cash, providing flexibility for opportunistic acquisitions and buybacks.
• Diversified revenue streams across insurance, utilities, and transportation buffer against sector-specific downturns.
• Robust historical returns: 66% three-year and 191% five-year gains, far outpacing major indices.
• Technical indicators signal continued institutional support and potential for further upside.
• Leadership transition appears well-managed, with clear succession plans and market reassurance.

🟥 The Bear Case for BRK-A

• Legal liabilities from PacifiCorp wildfire litigation could significantly impact utility segment earnings.
• Concentration risk from heavy exposure to top holdings like Apple and Coca-Cola.
• Premium valuation (P/E 12.93) leaves little room for error if macroeconomic conditions worsen.
• Inflation and rising rates may pressure margins in manufacturing and retail businesses.
• Succession uncertainty, while addressed, remains a potential overhang as Buffett approaches retirement

Berkshire Hathaway’s blend of operational stability, strategic cash deployment, and disciplined capital management continues to attract investors seeking both growth and downside protection. While short-term volatility around earnings and the annual meeting is likely, the company’s long-term thesis remains intact.