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Berkshire Hathaway’s new chief executive Greg Abel on Saturday said that he was committed to retaining the $1.1tn conglomerate’s fortress-like balance sheet, and that its massive cash holdings did not signal a retreat from dealmaking.
Abel used his first letter to shareholders to underscore his investment bona fides and his commitment to the principles that predecessor Warren Buffett had long extolled.
Abel, who took over in January, cast himself as a steward of Buffett’s legacy and signalled that the company’s investment philosophy was not changing.
He told shareholders that Berkshire has been active in evaluating new investments and that it would remain a key port of call when companies wanted to sell. The Nebraska-based conglomerate would be “an asset, not a risk, to America and the global financial system”, he wrote.
“Our balance sheet is a strategic asset to be deployed at the right time,” he wrote. “It allows us to act decisively, invest when others are tentative or fearful, and stand firm when financial storms roll through.”
The 63-year-old said share repurchases would remain an “important capital allocation option” and the company would not pay a dividend so long as he and the board believed Berkshire could generate shareholder value with that capital.
Berkshire’s cash levels stood at $373bn at year-end, a record when excluding the value of Treasuries it had previously bought but had not yet paid for.
“Many times in Berkshire’s history, some observers have suggested that our substantial cash position signals a retreat from investing,” Abel wrote. “It does not.”
He pointed to Berkshire’s $9.7bn purchase of the chemicals business of Occidental Petroleum, which it completed earlier this year, as well as its agreement to buy pest control business Bell Laboratories.
“There will undoubtedly be incremental opportunities to deploy our owners’ capital without compromising Berkshire’s resilience,” Abel wrote. “My role is to ensure our liquidity levels and capital deployment remain intentional and deliberate.”
He added: “We will always aim for ownership of productive businesses over US Treasuries.”
Investors and analysts traditionally scour Berkshire’s annual letter, which in the past were filled with Buffett’s personal anecdotes, for insights into how the so-called Oracle of Omaha saw the world. Buffett previously used the missive to highlight key Berkshire staff, including Abel.
Abel has already begun to reshape Berkshire’s corporate headquarters. The company last year hired its first internal legal counsel and announced a top executive from Berkshire’s energy business, the unit Abel rose up through, would become its next chief financial officer later this year.
One of Buffett’s investment deputies, Todd Combs, departed for JPMorgan Chase as part of the reshuffle.
Berkshire shares are little changed this year and have performed in line with the return generated by the S&P 500 index of leading shares. The company has trailed the benchmark US stock index over the past year.