Over the weekend, Berkshire Hathaway (BRK-B) had its first annual meeting with its new CEO, Greg Abel. Abel needed to contend with investor calls to break up Berkshire to unlock value. He had to overcome being in the shadow of legendary investor Warren Buffett. And he needed to justify AI’s rise amid Berkshire’s cash holdings.
Berkshire quickly dismissed calls to break up the firm. Instead, CEO Abel will ensure continuity to run Berkshire the same way as before. After supportive words from Buffett, who reaffirmed his confidence in the new CEO, Abel addressed the rise of AI.
Abel said that Berkshire would not implement AI for the sake of AI. This is dissimilar to the mega-cap tech firms like Amazon (AMZN), Microsoft (MSFT), and Meta Platforms (META). Despite weak CoPilot subscriptions (powered by ChatGPT), Microsoft said that it would increase its capital expenditures to cover the cost of rising chip prices.
In contrast, Berkshire focused on the core business issues. The firm needs to improve its railway and insurance businesses. For example, Geico faces tremendous competitive pressures from Progress (PGR). PGR stock is near its 52-week low, while Chubb (CB) and Manulife (MFC) are near their yearly highs.
The Shocker
Buffett told CNBC’s Becky Quick that the investing environment was not ideal. The firm’s cash levels rose to a record, at $400 billion. That will pressure Berkshire to invest, but expect the firm to push back. Until returns on investments improve, Berkshire will sit patiently and wait for better opportunities. That would require stocks to trade at a deeper margin of safety.
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