Warren Buffett’s announcement to step down as CEO of Berkshire Hathaway at the end of 2025, with Greg Abel as his successor, has sparked a sharp market reaction, with Berkshire’s stock dropping as much as 7% on Monday, May 5, 2025. This dip, coupled with Buffett’s legendary status, raises the question of whether it’s time to buy or sell Berkshire Hathaway shares
Reasons to Buy the Dip
Buffett’s Continued Involvement: Buffett will remain Chairman of the Board, suggesting he’ll still influence major capital allocation decisions. His pledge to retain all his shares—“I have no intention – zero – of selling one share of Berkshire Hathaway”—signals confidence in the company’s future under Abel’s leadership.
Strong Fundamentals: Berkshire Hathaway is a diversified conglomerate with over 60 businesses, including GEICO, BNSF, and Berkshire Hathaway Energy, generating steady cash flows. The company’s $334 billion cash pile as of early 2025 provides flexibility for acquisitions or buybacks. Despite a reported earnings decline, its portfolio of leading businesses remains robust.
Greg Abel’s Track Record: Abel, handpicked by Buffett in 2021, has been running Berkshire’s non-insurance operations and has a strong reputation. Buffett himself stated Abel is a better business executive in some ways. Analysts like UBS’s Brian Meredith note Berkshire is less reliant on Buffett’s investing prowess today, given its diversified operations.
Historical Resilience: Buffett highlighted that Berkshire’s stock has dropped 50% three times in six decades without fundamental issues, framing such dips as opportunities. The current 5-7% drop is modest by comparison, and the stock has outperformed the S&P 500 recently, up 13% year-to-date versus the S&P’s 4% decline.
Reasons to Sell or Hold Off
Loss of Buffett’s “Clout”: Analysts like UBS’s Brian Meredith argue Berkshire will miss Buffett’s unparalleled market influence, relationships, and capital allocation skills. His departure as CEO could reduce Berkshire’s ability to secure favorable deals, impacting long-term growth.
Market Reaction and Uncertainty: The stock’s 5-7% slide reflects investor unease about the transition. CFRA Research’s Cathy Siefert suggests the sell-off is partly due to uncertainty about Berkshire’s future and broader economic concerns, especially with Trump’s tariff policies, which Buffett warned could destabilize global trade.
Recent Selling Trend: Berkshire has been a net seller of stocks for nine consecutive quarters (through Q4 2024), totaling $173 billion, indicating Buffett’s caution about market valuations. This conservative stance, coupled with a pause in share buybacks in late 2024, suggests Buffett sees limited immediate opportunities, even in Berkshire’s own stock.
Valuation Concerns: Despite the dip, Berkshire’s stock has rallied strongly, tripling the S&P 500’s performance over the past year and delivering 185% returns over five years. Some investors may view it as fully valued, especially with the leadership transition adding risk.
Recommendation
Buy the Dip (Cautiously): For long-term investors, the 5-7% dip seems overblown given Buffett’s continued role, Abel’s readiness, and Berkshire’s fundamentals. Consider dollar-cost averaging to mitigate volatility, especially if the stock falls further.
Sell or Hold Off: If you’re risk-averse or focused on short-term gains, waiting for clarity on Abel’s strategy or broader market conditions might be prudent. Selling could make sense if you’re sitting on significant gains and wary of transition risks.
Final Thoughts
Berkshire Hathaway remains a strong long-term investment, but the leadership transition introduces uncertainty. Weigh your risk tolerance and investment horizon.
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