Warren Buffett's Successor, Greg Abel, Is Sending a 'Loud Signal' About Investing Today
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Major stock indices have recently been flirting with record highs. For Greg Abel, CEO of Berkshire Hathaway and successor to investing legend Warren Buffett, today's asset prices mean one thing: Be patient and wait.
The S&P 500 and the tech-heavy Nasdaq both closed at fresh all-time highs on Friday, one day before Abel greeted Berkshire shareholders as CEO for the first time at the company's annual meeting.
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Abel pledged to stick with the long-term, buy-and-hold investing approach embraced by Buffett, who stepped down as CEO last year and grew the conglomerate into a $1 trillion juggernaut during his 60 years at the helm.
Berkshire's strength comes not only from the companies — ranging from insurance to railroads to electricity — under its umbrella, but also from its portfolio. The company holds nearly $300 billion in equities, with major stakes in Apple, American Express and Coca-Cola. It also has close to $400 billion in U.S. Treasurys, a record-high level of cash that indicates the company's executives don't see a lot of great buying opportunities today.
“Berkshire delivered strong operating growth, but the real story is the $400 billion cash pile,” Robert Schein, chief investment officer at Blanke Schein Wealth Management, tells Money in an email. “It’s a loud signal that Buffett and Abel aren’t finding value in today’s market.”
Buffett said as much, as well, in an interview with CNBC during the meeting.
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“It isn’t our ideal surrounding area — or environment, I should say — in terms of deploying cash for Berkshire,” the former CEO said, noting high asset prices. (High asset prices mean there's less wiggle room if a company's earnings don't meet expectations and increases the risk of loss if the market corrects.)
Speaking Saturday in Omaha, Nebraska, Abel emphasized that a core tenet of Buffett’s investing philosophy is a willingness to wait for good investment opportunities.
“One of our greatest strengths at Berkshire is patience,” he said in response to a shareholder question about how young investors should balance patience with action. “There will be opportunities that come over time ... It doesn’t mean you need to deploy your capital or spend all your money now.”
Schein says this is good advice for retail investors and retirement savers, too.
“Berkshire’s strategy reinforces a simple message: prioritize income, keep liquidity and don’t chase risk late in the cycle,” he says, adding, “Patience is not a weakness.”