Introduction
Greg Abel, newly installed Chief Executive of Berkshire Hathaway, used his first annual letter to shareholders on Saturday to attempt a steadying hand over the sprawling conglomerate. In an 18-page, single-spaced communication, Abel emphasized preservation of the company’s large cash position, an adherence to the values of his predecessor Warren Buffett, and a commitment to the decentralization that has long characterized Berkshire’s operating model.
Liquidity and capital deployment
Abel underscored that Berkshire will retain a "fortress-like" balance sheet and will not hastily deploy the near-record cash stake the company holds. He said Berkshire’s cash - which stands at $373.3 billion - provides ample "dry powder," but made clear he had no plans to initiate dividend payments, a position Buffett historically opposed. The firm also has not repurchased its own stock since the spring of 2024.
"I recognize how you want us to succeed together, and to do so in the right way," Abel wrote. "My role is to ensure our liquidity levels and capital deployment remain intentional and deliberate." The line frames his approach to capital allocation as cautious and deliberate rather than opportunistic.
Homage to Buffett and continuity
Abel paid tribute to Warren Buffett, who remains chairman and continues to attend Berkshire’s offices five days a week. He called Buffett a "remarkable" CEO and wrote: "Warren Buffett is arguably the greatest investor of all time, with generations benefiting from his investment acumen." Abel added that investing in Berkshire historically has been "a vote of trust in our founder - a trust that now rests with Berkshire."
Observers have noted that Berkshire’s shares have lagged the Standard & Poor’s 500 index since Buffett unexpectedly announced in May that he was stepping aside as CEO. Abel’s letter, while lacking Buffett’s characteristic literary flourishes, appeared aimed at reassuring investors that the company’s strategy and culture will persist under new leadership.
CFRA Research analyst Cathy Seifert said Abel needed to show continuity and that the Berkshire franchise would continue despite the leadership change. "In my opinion, he hit the mark," she said. Dan Hanson of Neuberger Berman, who manages more than $6 billion on his quality equity team, said the letter should dispel doubts about Abel’s suitability to lead the company.
Financial results and writedowns
The letter came as Berkshire reported weaker profitability in its latest results. The company took writedowns for its roughly 27% stakes in both Kraft Heinz and Occidental Petroleum. Fourth-quarter operating profit fell 30% to $10.2 billion, driven in part by a downturn in income from insurance operations such as Geico. Net income for the quarter declined 3% to $19.2 billion, reflecting a $4.5 billion writedown for Occidental, though Berkshire posted gains from equity holdings led by Apple and American Express.
For the full year, operating profit fell 6% to $44.49 billion, while net income declined 25% to $66.97 billion. Full-year revenue was essentially flat at $371.44 billion. Buffett long advised investors to look past swings in net income caused by accounting rules governing equity investments; Abel’s letter did not depart from that view.
Seifert noted Abel also set expectations that growth in reinsurance and commercial insurance could be limited in 2026, writing that such segments may show little to no expansion in the coming year.
Operational accountability and performance gaps
While professing continuity in culture and structure, Abel was frank about underperformance at several Berkshire businesses. He said the performance gap between the railroad BNSF and industry-leading rivals is "too wide," and described recent problems at the Shaw flooring unit as "self-inflicted" and harmful to quality and service. He emphasized that each business is accountable to its CEO, who is expected to pursue "operational excellence relentlessly and close performance gaps."
Dan Hanson responded to those comments by calling them "fighting words," suggesting the critique signals tougher scrutiny from headquarters even as Berkshire maintains its customary decentralization.
PacifiCorp wildfire exposure
Abel addressed pressure on Berkshire’s utility PacifiCorp stemming from litigation tied to wildfires that burned more than 500,000 acres in 2020 in Oregon and California. Plaintiffs have alleged PacifiCorp failed to de-energize power lines. The utility has reached settlements totaling more than $2.2 billion, but faces as much as $50 billion of additional wildfire claims.
Abel said Berkshire accepts responsibility when its operations cause wildfires, but that the company will contest claims it views as unjustified. "PacifiCorp is not an insurer of last resort and should not be treated as a deep pocket," he wrote. Abel added that "accountability, paired with principled opposition to unwarranted liability, is essential to preserving the regulatory compact that governs utilities."
Workforce and business-level impacts
The letter also noted that one of Berkshire’s better-known businesses, Fruit of the Loom, cut 6,000 jobs last year as revenue fell. Abel indicated he intends to invest in durable, well-run businesses Berkshire understands and to avoid "businesses that undermine the fabric of society or could jeopardize Berkshire’s reputation." He did not elaborate on specific categories but made clear reputation risk will factor into acquisition and investment choices.
Investment oversight and Ted Weschler
Berkshire has not yet named a chief investment officer to formally succeed Buffett. Abel said that ultimate responsibility for equity investments rests with him as CEO. He confirmed that longtime portfolio manager Ted Weschler, who manages about 6% of Berkshire’s equity investments, will continue to play a "broader role" evaluating significant opportunities and supporting Berkshire in other capacities.
Tenure and tone
Abel signaled his intention to remain engaged for an extended period, noting that in 20 years he would have had "just a fraction of the tenure that Warren had." He reiterated a commitment to the decentralized management style that leaves day-to-day operations to individual business leaders, while holding those leaders accountable for closing performance gaps where they exist.
Overall, Abel’s first letter blends deference to Berkshire’s long-standing practices and to Buffett’s legacy with a willingness to call out underperformance. The message appears designed to reassure investors of continuity while communicating a readiness to press for improved results where necessary.
Key points
- Abel pledged to preserve Berkshire’s large cash cushion of $373.3 billion and said he will not initiate dividends, maintaining Buffett-era capital allocation priorities.
- Berkshire reported declines in profitability, with a 30% drop in fourth-quarter operating profit to $10.2 billion and full-year net income down 25% to $66.97 billion following writedowns including a $4.5 billion charge related to Occidental.
- Abel signaled continuity in corporate culture and decentralized structure but criticized underperformance at businesses such as BNSF and Shaw, and addressed significant wildfire liabilities at PacifiCorp.
Risks and uncertainties
- Wildfire litigation tied to PacifiCorp poses substantial financial uncertainty, with more than $2.2 billion in settlements already reached and up to $50 billion in further claims outstanding - a risk concentrated in the utility sector.
- Profitability pressures in Berkshire’s insurance operations and writedowns in equity stakes present near-term earnings volatility and could influence investor sentiment across insurance and financial markets.
- Operational underperformance at major units such as BNSF and Shaw introduces execution risk in transportation, manufacturing and retail-related segments, potentially affecting revenue and service levels.
Conclusion
Greg Abel’s initial shareholder letter is crafted to reassure investors that Berkshire Hathaway’s balance sheet strength, decentralized governance, and investment discipline will continue despite the CEO transition. At the same time, the letter signals a willingness to be more vocal about underperformance and to defend the company against claims it deems unjustified. As Berkshire navigates writedowns, flat revenue and sizable wildfire liabilities, investors will be watching whether the mix of continuity and tougher operational scrutiny translates into improved results.