Berkshire Hathaway’s Warren Buffett has recently made an important announcement. The first in line to take over control of the company will be the CEO of its energy division, Greg Abel.
As Apple stock’s portfolio represents about 45% of Berkshire’s portfolio, and because Berkshire is a top 3 investor in the Cupertino company’s equity, an obvious question has come up: under the new chief executive, would Berkshire be as bullish on Apple stock as it currently is?
Abel vs. Buffett on Apple stock
Berkshire does not usually provide full transparency into its investment decision process. Regarding Apple stock, for example, it is generally understood that Berkshire’s initial 2016 position was initiated by CIO candidates Ted Weschler and Todd Combs.
Whether the conglomerate is run by Warren Buffett or Greg Abel, I find it unlikely that Berkshire’s views on Apple shares will change drastically based on the change of CEO alone. If anything, Mr. Abel is most likely to remain open to keeping the portfolio heavily tilted towards Apple, for a couple of reasons.
For starters, Greg Abel has been groomed and hand-picked by Warren Buffett to take over the CEO role. I have no reason to believe that the new chief executive’s portfolio ideas will deviate much from Buffett’s. In that regard, the Oracle of Omaha has been credited with the following quote:
“I have a plane that costs me a lot. If I use the iPhone like all my friends do, I would rather give up the plane. For something that costs a thousand bucks the iPhone is enormously underpriced.”
Also, should either Mr. Weschler or Mr. Combs rise to the position of CIO that is currently also occupied by Warren Buffett, the new investment officer might have equal saying as the CEO himself in how Berkshire’s portfolio is constructed. Again, both former hedge fund managers are believed to be behind the initial investment in Apple stock.
The key risk to the CEO change
Berkshire Hathaway currently owns about 5% of the Cupertino company’s equity. At early May prices, this represented over $110 billion worth of Apple stock.
Unwinding a position of this size, even if partially, could have a noticeable impact on Apple’s share price. For reference, Berkshire’s current ownership is equivalent to about 8 full days of Apple stock’s volume traded in the market.
Berkshire is, by far, the largest active investor in Apple. While Vanguard and Blackrock own more of the stock, both allocate shares primarily to passively managed ETFs, like the Vanguard Total Stock Market Index Fund and iShares Core S&P 500 ETF. If any mammoth investor can discretionarily dump Apple stock, that would be Berkshire Hathaway.
The change in leadership at Berkshire Hathaway may not happen for another several years. But today, does the transition worry you? Could Greg Abel be more inclined to trim the conglomerate’s Apple position? Leave your opinion below.
Read more from the Apple Maven:
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)