Since Warren Buffett announced his retirement in May, Berkshire Hathaway shares have been making headlines.
Warren Buffett led Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) for almost six decades. During that timeframe, he has generated a compound annual growth rate of nearly 20%.
The past five years have been especially fruitful for Berkshire Hathaway investors. Those who invested in Berkshire Hathaway shares at the height of the pandemic have generated a 172% return over five years.
That far outpaces the S&P 500 Index (SP: .INX), which is up 97% over the same time frame.
A $10,000 investment in Berkshire Hathaway five years ago would be worth $27,220. Given that Berkshire Hathaway does not pay a dividend, this return would be all capital gains.
What has driven this return?
One of Berkshire's standout investments came in 2016, when it purchased iPhone maker Apple Inc (NASDAQ: AAPL), becoming its largest holding.
At Berkshire Hathaway's recent annual general meeting, Warren Buffett praised Apple CEO Tim Cook.
I'm somewhat embarrassed to say that Tim Cook has made Berkshire a lot more money than I've ever made Berkshire Hathaway.
Despite these remarks, Berkshire has been reducing its stake in Apple over the past few quarters due to valuation reasons.
Apple still represents a sizeable 21% of Berkshire's US$276 billion portfolio.
However, the decision to reduce exposure to Apple appeared to have paid off. Over the past year, Apple is up just 4%, while Berkshire Hathaway shares have risen 20%.
Apple has had a challenging start to 2025. It is the Magnificent Seven company most affected by Trump's tariffs. During Trump's first term, the iPhone maker was able to secure an exemption. However, CEO Tim Cook has not been so lucky this time around. In fact, President Trump even floated introducing company-specific tariffs on Apple to deter the company from shifting its manufacturing headquarters to India.
Apple shares are down 17% for the year to date, while the S&P 500 Index has risen 2%.
What will the next 5 years look like?
Warren Buffett will officially step down as CEO of Berkshire Hathaway at the end of the year. Greg Abel will take over on 1 January 2026.
Abel comes with a wealth of experience, having been part of Berkshire Hathaway since it bought about 80% of MidAmerican Energy, where he was president, in 1999.
Buffett first mentioned Abel by name in the 2002 annual shareholders' letter, when he called him a "dealmaker" and noted that he was "a huge asset for Berkshire Hathaway."
Abel will certainly have big shoes to fill and a significant cash pile to make his mark. As of March 2025, Berkshire Hathaway's cash and short-term treasury bond holdings reached almost US$350 billion.
Will Greg Abel be able to replicate Buffett's track record of success? Only time will tell.
