Berkshire Hathaway has generated market-crushing returns for roughly six decades. But after the former CEO, Warren Buffett, stepped down, the company not only lost its charm but also some of the premium that investors paid for Berkshire’s stock, which has underperformed the broader market this year.
Now, Berkshire’s stock has bounced back over the past month, up 4.6% (as of Aug. 11), as new CEO Greg Abel, handpicked by Buffett, has started deploying some of Berkshire’s huge cash pile. But it still fails to convince Michael Burry of The Big Short, who recently noted that Berkshire is “an attractive investment.”
Why is Burry concerned?
But the concern is less about Abel and more about Berkshire’s towering cash pile, which reached almost $400 billion at the end of the first quarter.
“My biggest fear for Berkshire Hathaway was that when Warren finally stepped down, the successor would be too old and otherwise not Warren, so would not have his patience for the fat pitch,” Burry wrote on Substack.
“I believe this fear has come true. I do not find Berkshire an attractive investment going forward. I realise not much of the cash pile has been spent, and it remains large. However, these first steps look to be more framing moves than investment moves.”
Fat pitch is a common baseball term that Buffett often used to describe an obvious, low-risk opportunity that the market is mispricing.
Buffett has warned about the market’s speculative nature right now, but investors have been hoping Berkshire would put its huge cash pile to work.
As Burry points out, Abel is not Buffett. So, Buffett may not have been penalised for carrying nearly $400 billion of cash without paying a dividend, but the market may not have the same patience for Abel.
Further, a Motley Fool article says, “sitting on the sidelines while AI booms is easier said than done. Sure, investors who manage to avoid a crash will certainly be rewarded. But they can also be punished if they avoid AI and it goes on to generate gigantic returns.”
Abel puts Berkshire’s cash to work
However, Abel has started spending the cash. Abel has significantly increased Berkshire‘s equity position in Alphabet, which is now a top-five holding in the portfolio.
Berkshire also announced the acquisition of Taylor Morrison Homes in the second quarter for $6.8 billion, and repurchased roughly $4.5 billion of its own stock, more than the company had repurchased in either 2024 or 2025. Furthermore, Berkshire was a net buyer of stocks in the second quarter, breaking a 14-quarter streak of net selling.
