Berkshire Hathaway shares slipped after Buffett says he will step down as CEO, stocks surge pre-market

Shares of Berkshire Hathaway dipped over the weekend after Warren Buffett announced that he would retire as CEO by year-end, ending his six-decade reign over the $1.16 trillion conglomerate. The decision was delivered during the company’s annual meeting in Omaha, Nebraska, which caught investors off guard despite years of succession planning.

The 94-year-old CEO stated that he will officially hand over his position to Vice Chairman Greg Abel, whom economists had predicted would become his heir apparent. 

In January, Buffett had told investors that his time at the conglomerate was coming to an end, although when he planned to step down had not been disclosed until now. Abel himself was reportedly unaware that the announcement would be made at the meeting.

The news sent Class B shares of Berkshire Hathaway (BRK-B) down 2% in Monday’s premarket trading, falling to $528.91. According to Google Finance data, the shares’ price corrected positively to $539.83, less than an hour before markets opened.

Still, Berkshire’s Class B shares have a strong year-on-year performance, recording gains of approximately 33%, well above the S&P 500’s 12% gain over the same period.

Buffett trusts Abel to continue his legacy at Berkshire Hathaway

At the Saturday meeting, Buffett did not give a concise elaboration on how the transition would take place, although he confirmed Abel will step up to the chair position. The vice chairman addressed shareholders, promising to be more active in overseeing Berkshire’s subsidiaries, while continuing to let each unit operate independently and “in a very positive way.”

Abel has overseen most of Berkshire’s non-insurance businesses since 2018, while the firm’s insurance operations, including Geico, General Re, and National Indemnity, will continue to report to Vice Chairman Ajit Jain.

KBW analyst Meyer Shields told investors in a client note that Abel is competent, but the surprise Warren Buffett exit news would likely weigh on the stock in the near term. 

“Buffett’s departure will probably impact investors’ view of Berkshire more than it will actual operations,” Shields wrote.

According to market insiders, Buffett is supposedly irreplaceable for his investment acumen and his reputation as the Oracle of Omaha. The company holds stocks in several industries like railroads, insurance, energy, and even an ice-cream maker, which many have coined as a symbol of “stable, long-term value” since Buffett took charge in 1965.

Berkshire shareholders are worried about how the firm’s 189 operating units, $264 billion in stocks, and $348 billion in cash reserves would be managed without the $160 billion-worth CEO.

Stock market in the green, futures slips

Pre-market data shows the US stock market could start the week on a stronger footing, but stock futures are down across major indices. Futures tied to the S&P 500 fell 0.8%, Dow Jones Industrial Average futures dropped 278 points (0.7%), and Nasdaq-100 futures lost 0.9%.

The S&P 500 in Monday’s session looks set to open with a 1.5% gain, its tenth consecutive positive session and longest winning streak since November 2004. The tech-heavy Nasdaq Composite and Dow Jones Industrial Average also posted gains of 1.5% and nearly 1.4% respectively last Friday.

The Federal Reserve is slated to begin a two-day policy meeting on Tuesday, and the interest rate decision comes the following day. According to CME Group’s FedWatch tool, traders see only a 3.2% chance of a rate cut at this meeting.

The US dollar weakened for a second straight day, threatening to end the S&P 500’s winning streak. Brent crude futures plunged by as much as 4.6% following OPEC+’s decision to increase supply, while gold prices rose to $3,260 due to a weaker greenback.