Greg Abel Is Reshaping Berkshire's Portfolio. Here&#…

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What stocks will be Abel’s core, long-term holdings?

In his first letter to holders earlier this year, Abel began to lay out his vision for how he plans to run the company, including the stock portfolio. Interestingly, Abel listed four stocks he views as “core” to the company, and that will ly see “limited activity” moving forward, barring any changes to these companies’ fundamental theses.

The four listed were Apple (Berkshire’s largest holding), American Express, Coca-Cola, and Moody’s. Abel also views the company’s investments in Japan’s five largest trading houses in a similar light.

But also interesting were the names Abel did not mention. He didn’t mention Bank of America, which consumed over 7% of the portfolio at the end of the second quarter. In fact, Berkshire slightly trimmed its stake in Bank of America in the second quarter.

Abel also didn’t mention Berkshire’s large holdings in U.S. oil companies, including Chevron, which accounts for over 5% of the portfolio, and Occidental Petroleum, which accounts for 4.5%. Berkshire also owns 26.5% of Occidental’s outstanding s.

Berkshire has acquired several energy assets in recent years, and with Abel having run Berkshire Hathaway Energy, I thought there was a chance these two names would be long-term holdings. They still could be, but oil is very volatile, so perhaps Abel is not willing to commit just yet.

Berkshire Hathaway Stock Quote

NYSE: BRKB

Berkshire Hathaway

Today’s Change

(0.38%) $1.98

Current Price

$517.60

Key Data Points

Market Cap

$1.1TMarket cap calculated using publicly traded s outstanding only. Does not include unlisted, private, or dual-class non-traded s. Implied market cap may vary.

Day’s Range

$515.00 – $518.32

52wk Range

$464.01 – $537.74

Volume

Avg Vol

4.3M

Gross Margin

23.52%

It also looks Alphabet has become a core position. Buffett initiated a position in Google’s parent company last year, but under Abel’s leadership, Berkshire has plowed tens of billions into the stock, which now accounts for 10.6% of the portfolio.

Alphabet is really the first artificial intelligence hyperscaler Berkshire has gone big on.

Other minor moves

Berkshire has made some other minor moves in the portfolio under Abel.

Berkshire initiated its stake in Delta, which now accounts for 1.3% of the portfolio. ing the pandemic, Buffett dumped all of Berkshire’s airline positions, noting the industry had fundamentally changed. However, the airlines had been making strides in recent years due to pent-up demand and a greater reliance on add-ons, such as extra legroom. The Iran war has put a bit of a dent in the airlines because jet fuel is now so much higher, but the core thesis persists.

Berkshire has also increased its exposure to the housing sector by increasing its stake in stocks such as the major homebuilder and real estate company Lennar this year. High mortgage rates have crushed the housing sector in recent years. In the long term, this could be a good time to come in and play contrarian. Housing could bounce back if inflation slows and interest rates come down. It could also be intriguing down the line if the country finds ways to increase inventory, a move that seems to be desired by the broader public.

Finally, Abel has resumed repurchases of Berkshire stock after the company had essentially been on pause in recent years. Now, some of this could be due to Berkshire sitting on hundreds of billions in cash.

While the market may have afforded Buffett that latitude, Abel may not receive the same luxury. After all, investors want to see at least some of that cash put to work. I think capital returns will need to be more prevalent under Abel’s leadership.