Halls of Shrewd'm / US Policy
No. of Recommendations: 6
Berkshire Hathaway $BRK $BRK.B has underperformed $SPY by 25% since I sold in early 2024, back to 1.4x book. Is it a buy? What are future returns?
Earnings, including look-thru, get around $56B in GAAP NI/year, 5.5% earnings yield.
What does OpCo business growth add? Between 2022-25, non-insurance OpCo NI growth has been 1%. But Berkshire has needed $50 billion in cumulative investment to achieve the 1%! ($30B M&A+$20B Net CapEx.) When do we consider that Berkshire's collection of businesses, in aggregative, bottom tier?
Berkshire BV grew 12% since 2020. But half of this was $AAPL.
I think Berkshire returning 6-7% from here is best case. Am I being unfair? How? I'd like to see math on how they do 8%+ going forward.
https://x.com/FishtownCap/status/20458952028423050...would be sincerely interested in opinions on this.
No. of Recommendations: 1
And I'd like to know...I've queried Jim on this before and he's minimized it (I'm sure correctly, I'm not debating that at all)...how much more elevated buybacks above book value in the future will affect buyback rate of growth.
No. of Recommendations: 0
Uhh...of course I meant to end that last sentence as "book value rate of growth."
No. of Recommendations: 12
I kind of hate these discussions because it is of course impossible to know and you could take almost any period of time to skew it in whatever direction you wish to argue. It does however serve a useful purpose in getting the opposite opinion of the bull case which Berkshire shareholders (and me in particular) are certainly prone to.
With that said my guess is 8-10% long term. One thing that is completely unknown is future purchases that move the needle upward. With $377B in cash there will almost certainly be many purchases that do just that and I have a sneaking suspicion that Greg will be better at this than Warren. Let's be honest, late Warren purchases have not been very good and even with the poor recent track record the stock has appreciated at an acceptable clip long term. That's what investing in a well run company can do for you! Even the mistakes aren't all that bad when you're sitting on piles of cash.
Greg has beefed up legal which I assume is to take a keener eye at future purchases which Warren really didn't do. And while Warren was great at analyzing numbers & could move with speed the bottom line is the results in buying fully owned businesses have not been great the past 5-10 years. Perhaps I'm just hopeful Greg will be better but it is a different skillset than just buying undervalued equities which was really Warren's specialty. I think Greg will be better looking under the hood going in and fixing things up as an operator when the companies are under our umbrella. I know the CEO of one of our subs very well who reported to Greg and he was pretty glowing about Greg's ability to process all aspects of his business and identify areas for improvement.
One last thing, I know Greg has gone out of his way to talk about keeping our culture which for us as long term shareholders is vitally important but I think he will get us out of businesses that just aren't working, which Warren pretty much would never do. And we actually have some early proof of this with Greg's exiting of KHC.
No. of Recommendations: 1
What do you mean by "Greg's exiting of KHC?
No. of Recommendations: 0
No. of Recommendations: 7
Sorry, I should've said "intention to exit KHC", it was announced back in January.
One thought: we shouldn't read more into it than is known. Yes, that might be the case--it's a reasonable guess. But it may also just be the case that he wants that as an available alternative, so getting the status of the shares changed is just prudent bookkeeping.
Oddly enough I think KHC shares might be a reasonable buy at these levels. There's a price for everything, especially things that make money pretty steadily and aren't going to go bust, even if earnings per share aren't expected to outpace inflation.
Jim
No. of Recommendations: 4
"What do you mean by "Greg's exiting of KHC?"
===
Sorry, I should've said "intention to exit KHC", it was announced back in January.
https://www.cnbc.com/2026/01/21/berkshire-set-to-e....We shall see. 'Intent to exit' is a plausible hypothesis about why Berkshire might have registered its stake, but I don't think Abel actually said anything about selling; but please correct me if I'm wrong.
From the article you linked to:
The registration statement gives Berkshire the flexibility to reduce the position, rather than signaling an imminent sale, according to Stifel.
“The registration provides Berkshire Hathaway the ability to reduce its ownership stake; we believe transaction notifications are not required outside of quarterly 13F filings,” Stifel analysts wrote. “The next update is likely to be in mid-May, when Berkshire reports its first fiscal quarter activity.”dtb
No. of Recommendations: 1
One thought: we shouldn't read more into it than is known. Yes, that might be the case--it's a reasonable guess. But it may also just be the case that he wants that as an available alternative, so getting the status of the shares changed is just prudent bookkeeping.
Also true! I should've said "a possible intention to exit KHC" :-) I'll get it right one of these times!! Will be interesting to see in a couple of weeks though if we have been offloading any shares.
No. of Recommendations: 16
I kind of hate these discussions because it is of course impossible to know and you could take almost any period of time to skew it in whatever direction you wish to argue. It does however serve a useful purpose in getting the opposite opinion of the bull case which Berkshire shareholders (and me in particular) are certainly prone to.
With that said my guess is 8-10% long term.
I’m probably going to demonstrate some spectacular stupidity here, bvut that never stopped me before.
I’m expecting/counting on a point or two higher than the market, and staying ahead of inflation.
I really don’t hope for the kind of outstanding performance Buffett had (or even half) because, well, 1) Buffett. It’s like hoping for the same performance from Peter Lynch’s successor. You might get lucky, but those only come around every so often, and they’re not usually in the same cafeteria line.
Greg’s handling of the Energy business is excellent, and could translate elsewhere, but that would mean a big change in the way the company operates. If it is to be “Greg led”, then it’s not going to be as decentralized, which has been promoted as one of the elements of the “secret sauce” over the years. If Greg is going to dump poor performers, well OK, but that also argues against “family firms selling to keep things stable”. (That may have outgrown its usefulness, given the size of the company now, dunno. There are precious few private firms around which could move the needle, I’ll say.)
The returns on the cash and/or stock portfolio I would hope to be good, but again, is Greg a stock picker who has demonstrated that talent over multiple cycles? Not that I know of.
The company is pretty much, to misappropriate Paul Krugman’s remark about the US, an insurance company with an energy and railroad on the side. Oh, and a pile of cash and stuff. It will be interesting to see what it looks like 10 years from now, eh?
In short, I’m hoping for positive movement forward, but not the kinds of terrific performance (laces with periods of blah) we’ve come to expect. But that’s OK with me; I’m in the “wind down” phase, just trying to “stay rich.” I’d advise newbies trying to “get rich” to make this a small base, but look eslewhere for the big bonanzas.
No. of Recommendations: 12
The company is pretty much, to misappropriate Paul Krugman’s remark about the US, an insurance company with an energy and railroad on the side. Oh, and a pile of cash and stuff. It will be interesting to see what it looks like 10 years from now, eh?
In short, I’m hoping for positive movement forward, but not the kinds of terrific performance (laces with periods of blah) we’ve come to expect.
I agree with this. I have no great expectations of high growth rates from Berkshire, but I think the selling point is that stocks in general are at nosebleed prices, and Berkshire has a lot less downside than most. If there's a big dip, then there are about 350 billion reasons for thinking Berkshire will be well positioned to take advantage.
So if the market goes up another 50% in the next 5 years, Berkshire may do about as well, or maybe even a little less well (stodgy businesses, lots of cash, too concentrated in the USA.) But if the market goes down 50%, maybe Berkshire will only go down 30%, and will improve its prospects going forward. Losing less money is not as exciting as making more money, but I'm ok with that for a small position.
dtb
No. of Recommendations: 14
Thinking out loud my expectations for Berkshire are very modest.
Living outside the US adds a significant fx risk, which is essentially a gamble that can go either way. I personally wouldn’t bet against the USD v GBP but it’s still a gamble.
Everyone would agree that companies that can compound, at decent returns and have a big addressable market to go after, are valuable and deserve a high market rating. The opposite is also true.
Berkshire is not making high returns. They are decent but not high.
The addressable market that Berkshire can go after in investing activity is already very small relative to capital.
Gemini returns the 19 companies below when asked for US companies with >$100 billion market capitalization and a 15% net profit margin. (Keeping it simple and using margin as a measure of quality). Large and arguably strong companies. Berkshire already owns a few. Berkshire probably thinks some are too expensive to buy and may not think they are all great companies. This is a very small list.
With Warren eventually fully retiring, the universe of investable companies must shrink further. Greg is probably not going to have as broad an industry knowledge as Warren. But maybe he is a learning machine. We will see.
Growing the insurance businesses? If there was a huge untapped well of profitable premiums, Berkshire would have already captured it.
Expanding existing wholly owned businesses - we can probably expect modest growth here. They operate in long established mature sectors.
Why then do some of the world’s most astute investors continue to let the cash pile up. They obviously think Berkshire can get bigger in short bursts during the right conditions. Whether that is: equities on sale; private companies on sale; or favourable insurance prices.
In short, I’m very happy to hold some Berkshire and benefit under certain conditions (the optionally argument) but as it’s not going to be a consistent and high compounder, it’s not going to trade at a fancy price. To do well it needs to be bought at a good price, which is maybe 30% lower than currently.
“This elite group represents the "Gold Standard" of American business—companies that have achieved massive scale while maintaining high efficiency.
As of April 2026, here are the primary US-based companies that meet these strict criteria:
The Tech & AI Heavyweights
These companies dominate the list because software and high-end silicon have negligible marginal costs compared to their sales price.
• Nvidia (NVDA): ~$4.9T Market Cap | ~55-60% Net Margin
• Microsoft (MSFT): ~$3.1T Market Cap | ~36% Net Margin
• Alphabet (GOOGL): ~$3.9T Market Cap | ~26% Net Margin
• Apple (AAPL): ~$3.8T Market Cap | ~26% Net Margin
• Meta Platforms (META): ~$1.5T Market Cap | ~34% Net Margin
• Broadcom (AVGO): ~$1.5T Market Cap | ~33-39% Net Margin
• Oracle (ORCL): ~$510B Market Cap | ~20% Net Margin
• Adobe (ADBE): ~$280B Market Cap | ~25% Net Margin
Financials & Payments (The "Toll Booths")
These companies benefit from taking a small percentage of trillions of dollars in global transactions with very little overhead.
• Visa (V): ~$610B Market Cap | ~52% Net Margin
• Mastercard (MA): ~$480B Market Cap | ~45% Net Margin
• JPMorgan Chase (JPM): ~$850B Market Cap | ~30-34% Net Margin
• S&P Global (SPGI): ~$175B Market Cap | ~32% Net Margin
• BlackRock (BLK): ~$140B Market Cap | ~30% Net Margin
Healthcare & Pharmaceuticals
Recent breakthroughs in GLP-1 medications and specialized biotech have kept margins in this sector extremely high for the leaders.
• Eli Lilly (LLY): ~$860B Market Cap | ~20-25% Net Margin
• AbbVie (ABBV): ~$300B Market Cap | ~18% Net Margin
• Merck (MRK): ~$290B Market Cap | ~16-20% Net Margin
• Vertex Pharmaceuticals (VRTX): ~$120B Market Cap | ~35-40% Net Margin
Consumer & Industrials (Brand Power)
It is much harder for physical-goods companies to maintain a 15% net margin, making these outliers particularly impressive.
• Coca-Cola (KO): ~$285B Market Cap | ~23% Net Margin
• Caterpillar (CAT): ~$370B Market Cap | ~15% Net Margin
• Texas Instruments (TXN): ~$160B Market Cap | ~30% Net Margin (Semiconductors classified as Industrial tech)”
No. of Recommendations: 0
When you say,
"To do well it needs to be bought at a good price, which is maybe 30% lower than currently."
Do you mean ~($475/sh x 0.7)= ~$332/sh?
Would that be below book value?
No. of Recommendations: 2
Given the cash, 30% is a bit extreme. I would be interested in adding at a 20% haircut, or $800 Billion market cap. That wouldn’t be a difficult decision.
The downside protection is my reason for holding, not spectacular business growth or valuation multiple expansion.
No. of Recommendations: 8
From an "The Economist" article about Apple´s change on the top:
Mr Cook ... has proved wrong the adage that you don’t want to be the CEO who follows a legend. That gives Mr Ternus particularly big shoes to fill. He will be the CEO to follow two successive legends.
Exactly where our Greg Abel is, following one or rather 2 legends. I think nobody here expects him to become a legend too, that we are absolutely content with him being a good-to-great manager of what the legends did build.
No. of Recommendations: 7
Exactly where our Greg Abel is, following one or rather 2 legends. I think nobody here expects him to become a legend too, that we are absolutely content with him being a good-to-great manager of what the legends did build.
I disagree, I think Greg will run Berkshire better and more profitable than ever. He already aligned his interests with mine by committing his after tax paycheck to Berkshire shares in perpetuity. This will amount to 100’s of millions during his reign as CEO. The best of Berkshire is in the windshield! I have no evidence, just a gut feeling. 😊
No. of Recommendations: 3
"Exactly where our Greg Abel is, following one or rather 2 legends. I think nobody here expects him to become a legend too, that we are absolutely content with him being a good-to-great manager of what the legends did build."
Do you recall any CEO agreeing to put ALL his after-tax comp into the stock at market? I don't.
Greg has the opportunity to be an all-star, but I doubt it happens while Uncle W is in the house.
No. of Recommendations: 0
hclasvegas:
Do you recall any CEO agreeing to put ALL his after-tax comp into the stock at market? I don't.
Elon Musk takes NO SALARY from Tesla. His only pay is his performance bonuses that require him to, among other things, raise the market cap of the company by massive amounts.
So in taking no salary, that would be equivalent to him taking a salary and putting it ALL back into Tesla stock, pre-tax! Take THAT Greg Abel!
R:)
No. of Recommendations: 1
Actually there are many CEOs who do this, take no salary only performance bonus. They include
Zuck at Meta (née Facebook)
Larry and Sergey at Alphabet (née Google)
Fairbank at CapitolOne
Smith at Axon
So yes it is a nice gesture and Abel follows in a long tradition of CEOs doing this.
R:)
No. of Recommendations: 3
“ So yes it is a nice gesture and Abel follows in a long tradition of CEOs doing this.
R:)“. Thanks for the thought but you appear to be confused. When did I say no ceo has ever agreed to work free in exchange for the right to take 25 percent of the company down the road very cheap? Does Greg have billions in cheap options? I’ll take Greg’s game plan any day. I’ll tell you something few people know. In the early 90s the SEC was dead set against tying compensation to , stock performance, and would send you, comment letters, forever to prevent you from getting, an effective notification. Been there done that, follow? :)
No. of Recommendations: 2
Abel is worth about $1 Billion and has 18% of his net worth in Berkshire.
He'll scale into the stock with about 2 1/2% of his net worth added each year and he'll have accumulated a nice holding in Berkshire likely dwarfed by other investments when his tenure concludes.
I say that because he starts his run at 18% of net worth and he will get no stock options (for foreseeable future).
It looks nice, sure. It's cute that the 2.5% of net worth equals "all of his salary". I just don't think it's a big deal. The bigger story is it keeps him from paying large cap gain taxes and he scales in efficiently. Plus if the stock stays in the dumper for a long time he'll get more stock with his $25 million :)
No. of Recommendations: 6
hclasvegas:
Does Greg have billions in cheap options? I’ll take Greg’s game plan any day.
Very good and interesting point! Considering Berk's Market Cap likely rises about $100Billion a year and Greg is buying $1 or $2 Million a year in stock, essentially instead of getting his salary, he would seem to be doing the work for a tiny fraction of the price that those other CEO's charge for presiding over $100Billion in value creation.
Yay Greg!
R:)
No. of Recommendations: 2
"It's cute that the 2.5% of net worth equals "all of his salary". I just don't think it's a big deal. "
IDK... that's a big commitment. When I worked in corporate tech, I never did that. 😉
No. of Recommendations: 2
Greg Abel’s situation has an unusual feature:
He’s still a net buyer. To your point, a big one, regularly, sure..but..
My key point Greg’s a net buyer—starting with a modest stake (roughly 18% of net worth) and steadily adding through ongoing dollar cost average like salary purchases.
Unlike Warren, who’s had all of his wealth already in Berkshire stock, Abel is in the process of building it.
That makes the sequence of returns matter.
If intrinsic value compounds steadily while the stock price lags in the early years, Abel buys more shares. More shares, bought cheaply, produce more wealth when price and value eventually converge.
If the stock moves up quickly instead this year, he simply ends up owning less of it. A very meaningful impact on his personal long term wealth
It’s just the same as young saver in a weak market: low prices early are a big advantage, not a problem.
Nothing about this changes the job. The mandate is still to grow intrinsic value per share. And there’s no practical way—or reason—to manage the stock price.
But the math is what it is:
For someone building a position, early underperformance is a feature. Very weak stock performance in year one of Greg’s fixed dollar accumulation program would be extremely advantageous to his wealth creation. The best year to have a bad year is this year.
No. of Recommendations: 7
"What are future returns?"
As Yogi Berra said, "It's tough to make predictions, especially about the future." Nevertheless, here are some historical data since Dec 1999 that may be useful.
BV per share statistics:
- 26-year BV per share growth, least squares, Dec 1999 - Dec 2025, 10.9%/yr
- 26-year BV per share growth r^2, Dec 1999 - Dec 2025, 0.991
Return statistics:
- 26-year annualized return, Dec 1999 - Dec 2025, 10.5%
- average 1-yr return, 11.8%
- average 3-yr return, 10.5% (3-year returns have a skewed normal distribution.)
- average 5-yr return, 10.3%
- average 10-yr return, 9.3%
- least squares 3-yr return when starting from latest quarter's ending P/B (1.41), 12.0%
- least squares 5-yr return when starting from latest quarter's ending P/B (1.41), 9.7%
If BV and price continue to grow over the next several years as they have for the last 26 years, then the nominal 3-year return from today's P/B might be expected to be in the 12%/yr range. However, unlike the smoothness of BV growth, 3-year price returns show a great deal of scatter, ranging (starting from today's P/B) from about -2%/yr to 21%/yr. What would Yogi say?
No. of Recommendations: 0
I say that because he starts his run at 18% of net worth and he will get no stock options (for foreseeable future).
I wouldn't be very surprised if the year after Buffett dies, the board will "force" Abel to take a bunch of stock grants/options to increase his overall stake in the company. Of course, that's assuming they want him to stay for the long-term (in Berkshire parlance, long-term means until mental/physical decline or death).
