Followers of Warren Buffett may bemoan is leave as CEO of Berkshire Hathaway (NYSE:BRK-B) at the end of this year. I know I will.
Warren Buffett will step down as Berkshire Hathaway CEO at year end with Greg Abel as his successor.
Berkshire made a major bet on Alphabet as a growth hedge and defensive AI play.
Todd Combs left his Berkshire role to become an advisor to JPMorgan CEO Jamie Dimon.
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But the reality is that over the decades, Buffett and his team have truly built a world-class company with exposure to some of the highest-quality assets that are about as recession-resistant as they come. With Berkshire beating the S&P 500 in the vast majority of its years as a publicly-traded entity, and a solid succession plan in place which will ensure the longevity of this incredible bastion of capitalism, those who own Berkshire stock may not want to consider selling before the end of the year ahead of this key transition.
Here are three top reasons why I think this is the case.
Warren Buffett portrait
Whether you’re a fan of Warren Buffett or not, the reality is that he’s going to go down as one of the best investors of all time. Accordingly, concerns around single-man risk, or the idea that when he leaves it’s game over for the company and its investors, is real.
Buffett has attempted in recent years to quell concerns around his eventual retirement or demise by putting together a succession plan. Of course, only so much of this plan has been released to the public. But in recent years, he’s made it clear that Greg Abel would be his successor, with his other lieutenants largely expected to stick with the company.
Now, that hans’t necessarily gone to plan. Todd Combs recently accepted a top job as an advisor to JPMorgan’s (NYSE:JPM) CEO Jamie Dimon, and the company’s CFO and head of its Geico insurance business have changed as well. But the reality is that even as some of the company’s lieutenants rotate out of the structure, Buffett has endeavored to build this business in a way that makes individuals important to its success, but not irreplaceable.
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Alphabet sign with the Google logo
One of the more attention-grabbing moves made (presumably) by one of Buffett’s lieutenants of late has to be Berkshire’s major bet on Alphabet (NASDAQ:GOOG) as a long-term way to generate market-beating growth.
Buffett and his team could have chosen to invest in Alphabet years ago, and would have likely been better off doing so than holding some of the company’s other slower-growth opportunities. But with many in the market sensing a real shift is underway with how the economy is likely to function years and decades from now, owning a piece of the future appears to have turned out to be a necessity rather than a possibility.
I think this is not only an investment that can be viewed as a relative growth hedge (in order for Berkshire to keep pace with the overall market, which is becoming very tech heavy) and also a defensive way to play not only the rise of AI, but also autonomous driving which could be among the best growth drivers coming out of the AI revolution. With a solid core business based on search, a durable moat in its core businesses, and the deep pockets to invest in the technologies of the future, I think this investment demonstrates exactly why Berkshire remains a solid bet as a proxy for ETFs right now.
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A woman looking at her watch
Even at more than 90 years old, Buffett maintained his long-term thinking. At that age, nothing is really permanent or long-term, and Buffett’s annual letters became more macabre and a reflection of his own reflections on his own morality. At some point, we’ll all approach this age, and there’s nothing we can do to escape these thoughts.
But I do think Warren Buffett’s very consistent and meaningful focus on putting together a company that can withstand market cycles and be a truly long-term store of value is incredible. I endeavor to create a portfolio that even remotely mimics what he’s created.
Finding high-quality companies that can be bought at a reasonable price and held for longer periods of time than most investors would likely be comfortable with is difficult. But I’d say the most difficult part of such a strategy is the patience to hold through market cycles. Even harder – buying when others think there’s no hope left.
Warren Buffett has left a blue print for his team, and all of us collectively, to try to live up to. I’m going to stick to Berkshire and ETFs as the primary way of growing my wealth, as I don’t have the same sort of abilities (mostly the patience piece) others possess. But to each their own.
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