Buy the Dip in Berkshire's Stock After Buffett Picks Successor?

Announcing his plans to step down as chief executive of Berkshire Hathaway BRK.B, Warren Buffett will pass the torch to Greg Abel, the vice chairman of non-insurance operations, including Berkshire Hathaway Energy. Buffett will remain chairman of the board to ensure continuity in Berkshire’s strategy.

With the news ringing out over the weekend, it wasn't surprising, as the “Oracle of Omaha” is 94 years old and has led Berkshire to unimaginable heights since taking the helm in 1965. Still, BRK.B shares have fallen 5% this week after hitting a 52-week high of $542 last Friday, but missed Q1 expectations on Saturday.  

Investors may be eying the dip as Berkshire has been a pleasant hedge against broader market volatility, like many of its Zacks Insurance-Property and Casualty Industry peers, with BRK.B still up +13% year to date. 

About Greg Abel

Serving as vice chairman of non-insurance operations since 2018, Greg Abel joined Berkshire in 1999 and will take over as CEO at the beginning of 2026. Abel assumed leadership of Berkshire Hathaway Energy after it acquired his former company, MidAmerican Energy Holdings, which marked Buffett’s first major investment in the energy sector.

Reassuring shareholders that Abel is well prepared, Buffett has described his successor as a huge asset for Berkshire, emphasizing Abel's ability to maintain the company’s culture through his leadership and business acumen.

Berkshire’s Q1 Results

Berkshire’s Q1 sales came in at $89.72 billion, which was down from $89.86 billion a year ago and missed estimates of $92.2 billion. On the bottom line, Q1 EPS of $4.47 dropped from $5.19 in the comparative quarter and came short of expectations of $4.81 per share.

The drop in earnings was attributed to what Berkshire called an uncertain environment due to President Trump’s tariffs and other geopolitical risks. Furthermore, insurance underwriting profit fell 48% from $2.6 billion in Q1 2024 to $1.34 billion, with the owner of Geico Insurance being impacted by the Southern California wildfires.  

Berkshire’s Monstrous Cash Pile

Causing investors to flock to Berkshire’s stock amid tariff concerns has been the company’s enormous cash pile, with over $42 billion in immediate cash holdings (Cash & Equivalents) at the end of Q1.

Furthermore, Berkshire has $347.7 billion in cash reserves when including short-term investments like U.S. Treasury Bills. Berkshire had $1.16 trillion in total assets in its latest SEC filing, which is nicely above its $507.79 billion in total liabilities.

Berkshire’s Outlook

While Berkshire usually avoids issuing forward-looking projections, the business conglomerate said its periodic operating results may be affected in future periods by the impacts of ongoing macroeconomic and geopolitical events.

Based on Zacks' estimates, Berkshire’s total sales are now expected to be up 1% in fiscal 2025 and are projected to increase another 4% in FY26 to $390.43 billion. Annual earnings are currently slated to dip 7% this year but are forecasted to rebound and rise 8% in FY26 to $22.16 per share.

Monitoring Berkshire’s P/E Valuation

At around $516 a share, BRK.B trades at 25X forward earnings, a noticeable premium to its Zacks industry average of 11.9X, which includes notable names like The Progressive Corporation PGR and Allstate ALL.  

However, Berkshire’s diversification sets it apart from many of its insurance peers, with BRK.B trading near its decade-long median in terms of forward P/E and the benchmark S&P 500’s current average of 21.5X.

Conclusion & Final Thoughts

For now, Berkshire’s stock lands a Zacks Rank #3 (Hold). Quite frankly, some investors may be looking for a sharper pullback in BRK.B as Warren Buffett has consistently emphasized that Berkshire Hathaway is best suited for long-term shareholders who understand its business model and avoid short-term speculation.

Although the opportunity to buy BRK.B after a steeper selloff could be advantageous, the company’s enormous cash positions may keep its stock afloat, as this will still attract investors despite tariff concerns. Either way it goes, Berkshire's stock remains a valuable investment thanks to its vast portfolio of businesses.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research