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Berkshire's New Era
What investors should know from Berkshire Hathaway's 60th annual meeting in Omaha
Fajasy
May 04, 2025 • Est. read time: 11 minutes
🌾 Welcome to StableBread’s Newsletter!
I attended Berkshire Hathaway's 60th annual meeting in Omaha.
Instead of recapping the entire 6+ hour event, this post shares the key insights investors should know about, including the leadership transition, financial results, business operations, investment philosophy, market commentary, and Buffett's views on current economic issues.
📜 Warren Buffett
Warren Buffett has led Berkshire Hathaway since 1965, turning it from a struggling textile company into a $1 trillion conglomerate. Over 59 years, the firm has achieved 19.9% annual returns. His value investing strategy prioritizes businesses with strong economic moats, exceptional management, and fair prices. Buffett’s annual shareholder letters are must-reads for investors, and his long-term “buy and hold” approach remains widely influential.
Leadership Transition Announcement
Surprise CEO Succession
Near the end of the meeting, Buffett made this announcement:
"The time has arrived where Greg should become the chief executive officer of the company at year-end. And I want to spring that on the directors effectively and give that as my recommendation."
Greg Abel, who has been preparing for this role since 2018, appeared surprised by the announcement. The transition includes:
Buffett will remain involved and could be helpful in certain situations.
He plans to continue coming to the office daily.
He'll serve as a "sounding board" for Abel.
Buffett will not sell any Berkshire shares. Rather, he will “give it away eventually.”
The board will formally consider this at their next meeting.
Howard Buffett (Buffett's middle child) will eventually become non-executive chairman upon Warren's death.
This transition ensures Buffett remains available for major decisions while Abel assumes full CEO authority.
Buffett expressed confidence in the transition, stating that Berkshire's prospects will be better under Abel's management than his own. He emphasized this by declaring "I have no intention - zero - of selling one share of Berkshire Hathaway," calling it an economic decision that reflects his faith in the new leadership.
Our thoughts: Buffett's decision to keep all his shares demonstrates his confidence in Abel's leadership by effectively betting his entire fortune on the succession plan.
Greg Abel's Leadership Philosophy
Abel, who has been with Berkshire for 25+ years, outlined his approach:
"We'll really continue to move forward with a very similar philosophy. It's an identical philosophy to what we've had currently and for the past 60 years."
Here are Abel's management principles for Berkshire:
Maintain Berkshire's reputation.
Keep a fortress balance sheet as a strategic asset.
Manage risk across all businesses.
Invest in 100% or minority stakes based on value relative to risk.
Take a long-term perspective on economic prospects and risks.
Abel's emphasis on continuity should reassure shareholders that Berkshire's fundamental approach won't change after the transition.
Financial Performance and Cash Position
Berkshire Q1 2025 Results
Berkshire reported mixed Q1 2025 results:
Operating earnings came in below expectations.
Insurance underwriting earnings decreased significantly year-over-year due to LA fires.
Cash reached $347.7 billion (up from $334.2 billion at end of 2024).
Foreign exchange losses from surge in Japanese yen.
Equity portfolio took a $5 billion accounting loss.
Energy business showed "nice growth" under Abel's management.
Buffett noted: "Berkshire's cash is now greater than the combined cash of Apple, Microsoft, Google, and Amazon."
Our thoughts: The $347.7 billion cash position isn't idle money. It's fuel for future opportunities, particularly during market downturns when quality assets become available at distressed prices.
Other Financial Metrics
Some other data points shared during the meeting include:
Berkshire's top five holdings remained American Express, Apple, Bank of America, Coca-Cola, and Chevron, with no material change in amounts.
GEICO's average policy price went from $40 in 1950 to around $2,000 today.
Auto accident deaths fell from six per 100 million miles driven to just over one.
Japanese trading companies investment worth about $20 billion at market.
Overall, these metrics reflect both Berkshire's long-term business evolution and the structural challenges facing the US economy.
Investment Philosophy and Capital Allocation
Buffett emphasized that extraordinary opportunities come infrequently:
"Charlie always pointed out that we made most of our money out of about eight or nine ideas over 50 years... every now and then you get extraordinary opportunities and most of the time you don't have much of an edge."
Here’s Buffett on Berkshire's capital allocation strategy:
Would rather have $50 billion than $335 billion in treasuries if opportunities existed.
Prefer owning 100% of businesses but will buy partial stakes.
Stock buybacks have stopped (Berkshire pays 1% tax on buybacks that shareholders don't).
The Japanese trading companies investment was made at "ridiculously low prices."
Regarding the Japanese investments, Buffett declared they "won't give a thought to selling those" for the next 50 years, signaling a commitment that extends well beyond his own involvement with the company.
Our thoughts: Buffett's comment about "eight or nine ideas" reveals an important investing principle. Most returns come from a small number of exceptional decisions, making patience more valuable than constant activity.
Real Estate vs. Stocks
Buffett explained his preference for stocks:
"There's just so much more opportunity in the security market than it does in real estate. And in real estate, you're usually dealing with a single owner or a family that owns maybe a large property."
He also emphasized the efficiency of stock markets, noting you can "do billions of dollars worth of business, totally anonymous, and you can do it in 5 minutes."
Business Operations
Insurance Business
Ajit Jain, who oversees insurance operations, addressed two key developments:
Private Equity Competition
Private equity (PE) firms have entered the life insurance space aggressively. Jain explained:
"The private equity firms that you mentioned are all very active in the life end of the business, not the property casualty end of the business... We do not like the risk-reward that these situations offer and therefore we put up the white flag and said, you know, we can't compete in this segment right now."
Our thoughts: Berkshire's withdrawal from life insurance shows their investment discipline. They're willing to step aside rather than take excessive risks for potentially low returns.
Autonomous Vehicles Impact
Jain explained the coming changes:
"Insurance for automobiles is going to change dramatically. Once self-driving cars become a reality... Most of the insurance that is sold and bought revolves around operator errors... To the extent these new self-driving cars are more safe and are involved in fewer accidents, that insurance will be less required. Instead, it'll be substituted by... product liability."
Our thoughts: The shift to product liability insurance could concentrate risk among fewer companies (automakers), potentially creating a more concentrated market structure in auto insurance.
GEICO's Turnaround
Under Todd Combs' leadership, GEICO has achieved significant improvements:
Workforce reduced from approximately 50,000 to 30,000. This reduction "translates to... at least $2 billion per year" in savings.
Achieved "a combined ratio that has an eight in front of it" for seven quarters.
Caught up with competitors in telematics technology.
Maintains $29 billion in float.
GEICO's efficiency gains demonstrate that even established businesses can achieve major improvements through focused management.
Energy and Infrastructure
Berkshire's energy business faces challenges. Buffett stated:
"Berkshire Hathaway Energy is worth considerably less now than two years ago due to societal factors like changing utility regulations and industry trends."
Abel discussed wildfire risks: "The reality the risk around the wildfires... they're not going away and we know that and the risk probably goes up each year."
Big Tech and Capital Intensity
When asked about big tech becoming more capital intensive, Buffett noted these companies now invest heavily in AI but still have potential for high returns.
He contrasted this with capital-intensive businesses like bottling that "require real money, trucks, machinery."
Future Berkshire Challenges
Looking ahead, the company faces challenges including:
Size limiting investment opportunities ("size is an enemy of performance at Berkshire").
Need for infrastructure investment requiring government cooperation.
Managing utilities in states with wildfire risks.
Maintaining culture across diverse operations.
These structural challenges suggest Berkshire's future returns may stagnate or decline even as its business quality remains high.
Economic and Market Views
Tariffs and Trade Policy
Buffett delivered his criticism of current trade policies, calling the Trump administration's protective tariff stance a "big mistake":
"Trade should not be a weapon. And the United States, United States, we've won. I mean, we have become an incredibly important country starting from nothing 250 years ago. There's nothing been anything like it. And it's a big mistake in my view when you have 7 1/2 billion people that don't like you very well. And you got 300 million that are crowing in some way about how well they've done."
He believes global prosperity benefits America rather than threatens it, arguing that "the more prosperous the rest of the world becomes, it won't be at our expense, the more prosperous we'll become and the safer we'll feel."
Our thoughts: Buffett views trade as positive-sum rather than zero-sum. When other countries become wealthier, they create more customers for American products, not fewer opportunities at home.
Fiscal Challenges
Key notes on fiscal challenges include:
"US debt at $37.5T (120%+ debt-to-GDP ratio) and $1T+ annual interest is unsustainable."
Government running "roughly a 7% gap" in fiscal deficit.
"K-12 spending at $1T annually, but students graduating at only 30% of grade-level expectations in math, science, and reading."
These fiscal metrics point to structural imbalances that could require significant economic adjustments in coming decades.
On DOGE (Department of Government Efficiency)
Buffett shared his perspective on the government's new efficiency initiative, acknowledging the widespread issue of bureaucracy:
"I think that bureaucracy is something that is amazingly prevalent and contagious even in our capital system... government is the ultimate. So it really doesn't have any checks on it."
On Currency Stability
When discussing long-term economic risks, Buffett emphasized the critical importance of maintaining a stable currency:
"A stable currency is fundamental to society, as debased currency screws those who trust the government and enriches those who profit off it."
Market Commentary
Buffett downplayed recent market volatility by comparing it to the Great Depression:
"This is not a huge move... this has not been a dramatic bear market or anything of the sort."
He noted that the Dow Jones fell from 381 in September 1929 to 42, emphasizing that today's volatility is minor by comparison.
Notably, he also warned that investors should prepare for more dramatic swings, predicting "a hair curler" compared to recent volatility will occur in the next 20 years.
Thanks for Reading!
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