The Oracle's Successor Makes His Mark 📊
Berkshire Hathaway's quarterly 13F filing is always a must-read, but this one carried extra weight. It was the first glimpse into the portfolio strategy of Greg Abel, the new CEO. The filing shows a dramatic shake-up: the fund slashed its holdings from 39 stocks to just 26, fully exiting 15 positions. While a fresh start is expected, the specific stocks Abel chose to buy have raised eyebrows across Wall Street.
Investors should note that while the broader market is digesting rate cuts, Abel is making a bet on two industries that his predecessor famously warned against: airlines and department stores. Is this a sign of a new, more aggressive era for Berkshire, or a rookie mistake?
The Reinvestment: A Tale of Two Sectors 🚨
Abel’s largest new position is a massive $2.6 billion stake in Delta Air Lines (DAL). He also initiated a smaller, yet symbolic, $55 million position in Macy's (M). These are not just random picks; they directly contradict Warren Buffett’s public regrets.
- Delta Air Lines: Buffett has called the airline industry a 'bottomless pit' for capital. His history with US Airways (a 'terrible mistake') and the 2020 COVID sell-off of all airline stocks proves this is a sector he actively avoids.
- Macy's: This is Berkshire’s first department store investment since 1966. Buffett has often stated that retail is a 'tough business' with a 'little moat.' The allure here is likely the real estate value of Macy’s flagship NYC store, but the stock has lost nearly 40% over the past decade despite that thesis.
The Good News: Alphabet 🚀
On the positive side, Abel’s largest buy by far was Alphabet (GOOGL) . He added roughly $10 billion, tripling the existing position. This aligns with the long-term AI thesis, as Google is uniquely positioned with both its own AI models (Gemini) and custom chips (TPU).
The market is split on whether Abel is a visionary or a novice. Here is the debate:
Historical Context: Buffett's Regrets vs. Abel's Bets
| Sector | Buffett’s Verdict | Abel’s Action | Risk Level || :--- | :--- | :--- | :--- || Airlines | 'Unforced error', 'Bottomless pit' | Bought $2.6B DAL | 🟢 High || Department Stores | 'Tough business, little moat' | Bought $55M M | 🟡 Medium || Tech (AI) | 'Not my circle of competence' (historically) | Added $10B GOOGL | 🟢 Low/Medium |
Technical Insight: From a technical perspective, Delta’s stock is currently testing a key support level around $45. If Abel’s buy creates a floor, it could signal a base for a recovery. However, the stock remains highly sensitive to fuel prices and travel demand, which are cyclical risks that Buffett avoided.
📊 In-Depth Fundamental Analysis
| Company | Share Price | P/E Ratio | P/B Ratio | ROE | Operating Margin (OPM) | Revenue Growth |
|---|---|---|---|---|---|---|
| GOOG (Alphabet) | $379 | 28.94 | 9.60 | 38.88% | 36.12% | 21.80% |
| M (Macy's) | $21 | 8.91 | 1.12 | 13.64% | 7.47% | -1.10% |
| GOOGL (Alphabet) | $383 | 29.23 | 9.69 | 38.88% | 36.12% | 21.80% |
| MA (Mastercard) | $499 | 28.83 | 65.81 | 232.08% | 60.84% | 15.80% |
| V (Visa) | $329 | 28.70 | 16.42 | 60.35% | 67.35% | 17.10% |
| AMZN (Amazon.com,) | $266 | 31.41 | 6.48 | 24.29% | 13.14% | 16.60% |
| NYT (New) | $75 | 32.17 | 6.03 | 19.68% | 13.13% | 12.10% |
| DAL (Delta) | $76 | 11.12 | 2.44 | 24.99% | 3.18% | 12.90% |
Scenario Analysis: Two Paths for Berkshire 📈📉
Best Case Scenario (Bull Case):
- Abel is a more modern manager who sees value where Buffett saw risk. The post-COVID airline industry has consolidated (fewer players), leading to higher pricing power. Macy’s real estate gets unlocked via a spin-off or sale. The massive Alphabet bet pays off as AI revenue explodes. Berkshire’s portfolio becomes more growth-oriented.
Worst Case Scenario (Bear Case):
- Abel repeats Buffett’s US Airways mistake. A recession hits, Delta burns cash, and Berkshire is forced to sell at a loss. Macy’s continues its secular decline as retail shifts online. The Alphabet bet is safe, but the other moves drag down overall portfolio returns. The market loses confidence in Abel’s capital allocation skills.
Conclusion: While it is too early to judge Abel, the early signals are mixed. The Alphabet purchase is a home run, but the Delta and Macy's bets are classic 'value traps' that Buffett spent a career avoiding. Investors should watch the Q2 13F closely to see if these were just 'first quarter jitters' or a new strategy.
