Immediately after Buffett’s retirement announcement, the Class-B share of the company fell sharply. However, over the next few days, the stock has recovered and even recouped old levels. The big question is; whether Buffett’s exit will make a big impact on the returns of the fund? Remember, in the last 60 years that Buffett was at the helm, the value of Berkshire compounded at twice the rate of the S&P 500. That is big, if you look at a 60-year period. However, it misses a very important perspective.

If you look back, some of Buffett’s picks have had a dream run. He has held Coca Cola, Amex, and Bank of America for ages. However, the story is more of the big opportunities he missed out in the last 20 years. He did miss out on Microsoft and latched to Apple very late. The last few year’s performance looks good largely due to Apple. Buffett has, however, shunned many of the new age stocks like Google, Amazon, Facebook, NVIDIA etc. All these stocks have been multi-baggers. One can commend his focus on his core knitting, but the fact is that the biggest stories were skipped. 

Over the years his trades in Coca Cola, GEICO, Bank of America, Amex, Wells Fargo, and Goldman Sachs have worked wonders for Buffett. However, he made some bad decisions too. He bought shoe maker, Dexter, which was worth zero. A few years back, Buffett bought heavily into airline stocks, but had to quickly book a loss and retreat. He had similar experience with IBM too; post which he became all the more wary of tech. His last few years have been all about the phenomenal returns of Apple. However, the big concern is that Berkshire sits on a cash stash of $348 billion, idling away in cash and treasuries. That is a story that beats the best of fund managers. Why are they not finding stock ideas? 

Like in the case of Apple, when the founder becomes larger than the idea, it is best for the founder to move on. Abel brings a lot of expertise in new ideas, and it remains to be seen if Berkshire is able to make a big foray into some of the new ideas like artificial intelligence, green energy, machine learning, big data, lithium batteries etc. It would be the much-needed avenue to deploy the funds of investors. Back in 2008, Buffett had invested in BYD of China and sold it at a neat profit. With a cash stash of $348 billion, Berkshire needs a more institutionalized mechanism to deploy fund in lucrative cutting-edge ideas!