Carmignac's Bet on Berkshire: Greg Abel's New Era Balances Value with Strategic Growth

Key Takeaways

• Carmignac Gestion's new 3% portfolio allocation to Berkshire Hathaway signals confidence in CEO Greg Abel's strategic evolution of the conglomerate.
• Abel is actively reshaping Berkshire's portfolio, making significant investments in AI infrastructure through Alphabet and expanding into undervalued Japanese markets.
• This shift emphasizes operational excellence and disciplined capital deployment, aiming to enhance per-share value beyond traditional value investing.

The investment world is watching closely as Berkshire Hathaway (NYSE: BRK-B) navigates its first full year under CEO Greg Abel, who took the helm at the beginning of 2026. With legendary investor Warren Buffett remaining Chairman, Abel is now solely responsible for capital allocation, a role previously synonymous with Buffett's unparalleled acumen. This pivotal transition has drawn the attention of major asset managers, with Carmignac Gestion recently opening a new position in BRK-B, representing 3% of its portfolio. This move underscores a growing belief that Abel is successfully charting a new course for the $1.10 trillion conglomerate, balancing its bedrock of stable, cash-generating businesses with strategic, growth-oriented investments.

Trading at $507.78 as of July 2, 2026, BRK-B shares have seen a dynamic period, fluctuating within a 52-week range of $455.19 to $516.85. While the stock has underperformed the broader industry, losing 4.7% year-to-date as of May 2026, Carmignac's entry suggests a long-term conviction in Abel's ability to unlock value. This is not merely an endorsement of Berkshire's enduring stability, but a calculated bet on its strategic evolution.

The Oracle's Successor Charts a New Course

The shift in leadership at Berkshire Hathaway marks a profound moment for the investment community. For decades, Warren Buffett's philosophy of investing in understandable businesses with wide moats at attractive prices defined the conglomerate. His aversion to rapidly evolving tech companies, which he famously deemed too difficult to predict, shaped Berkshire's portfolio for generations. However, with Greg Abel now at the controls, a new playbook is emerging, one that respects the past while strategically embracing the future.

Abel's mandate, as outlined by Buffett, includes increasing operating earnings, decreasing shares outstanding, and hoping for "an occasional big opportunity" for sizable cash investments. While Buffett and Charlie Munger focused heavily on capital allocation, Abel, with his background as an operator, is emphasizing "operational excellence" to drive value. This focus on improving productivity and performance management across Berkshire's diverse subsidiaries is a crucial element of his strategy, aiming for improved margins and operating earnings over time.

Carmignac's decision to allocate a significant portion of its portfolio to BRK-B suggests a recognition of this evolving strategy. The firm, known for its global perspective and focus on sustainable investment, appears to be endorsing Abel's blend of disciplined value creation and targeted growth. This is particularly notable given Carmignac's broader H2 2026 outlook, which highlights an overweight position in emerging markets and a belief that emerging market equities, particularly in tech, remain undervalued compared to the US. While Berkshire itself isn't an emerging market play, Carmignac's willingness to look beyond traditional US tech might align with Abel's broader diversification efforts.

Abel's Portfolio Reshuffle: A Dual Strategy

Under Greg Abel's leadership, Berkshire Hathaway's investment portfolio is undergoing a significant transformation, moving beyond the strictures of the Buffett era. The 13F filing from May 2026 revealed a clear strategic pivot, characterized by both divestments from traditional holdings and bold new allocations. This reshuffle reflects a dual strategy: shedding positions in sectors deemed less aligned with future growth or offering limited upside, while simultaneously making calculated bets on high-growth areas and undervalued international markets.

Berkshire exited its positions in payment giants Mastercard and Visa, as well as managed care behemoth UnitedHealth Group and insurance broker Aon. It also lowered its stakes in Bank of America and Chevron, signaling a re-evaluation of its exposure to financial and energy sectors. These divestments free up capital for new opportunities, demonstrating Abel's willingness to prune the portfolio.

The most striking shift is Berkshire's increased embrace of the technology sector, a notable departure from Buffett's historical skepticism. The conglomerate bought nearly $17 billion worth of Alphabet (NASDAQ: GOOGL) shares over the past three quarters and plans to purchase an additional $10 billion in a private placement. This investment, part of an $80 billion offering by Alphabet to fund its data center construction, is set to make Alphabet Berkshire's fourth-largest equity holding. As Geoffrey Seiler of The Motley Fool noted in June 2026, "Alphabet is a bet on tech and artificial intelligence (AI), not a consumer goods bet." This move signals a clear intent to gain exposure to the burgeoning AI infrastructure market, with Alphabet planning $180 billion to $190 billion in capital expenditures this year and further increases in 2027.

Beyond tech, Abel is also diversifying geographically and re-engaging with previously divested sectors. Berkshire bought 39.8 million shares for $2.6 billion in Delta Air Lines, marking a comeback in the airline industry after a previous exit. Furthermore, the company has significantly increased its presence in Japan, now holding more than a 10% stake in all five major trading houses: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. This Japanese expansion is driven by improved corporate governance reforms, increased transparency, and the relatively inexpensive valuations of Japanese equities compared to their U.S. peers. Berkshire is also planning to invest nearly $1.8 billion in Tokio Marine Holdings, further solidifying its international insurance footprint.

Abel's capital allocation isn't solely focused on public equities. He recently agreed to acquire homebuilder Taylor Morrison Home for $6.8 billion in cash, including the assumption of debt, which integrates seamlessly with Berkshire's existing housing-related businesses. This blend of tech-forward investments, international diversification, and strategic acquisitions in stable industries paints a picture of a Berkshire Hathaway that is both evolving and disciplined.

Operational Excellence and the Cash Conundrum

While the portfolio reshuffle captures headlines, Greg Abel's focus on operational excellence within Berkshire's vast array of owned businesses is equally critical to its future value creation. Unlike his predecessor, Abel is a hands-on operator, committed to driving efficiency and improving margins across the conglomerate's diverse segments. This approach is already yielding results, with Berkshire's first-quarter 2026 operating earnings rising by 17.7% year-over-year to over $10.1 billion, significantly above the $4.6 billion reported in Q1 2025. Stripping out the impact of foreign exchange, operating earnings still saw a respectable 7.2% year-over-year increase.

The insurance business remains Berkshire's most significant segment by operating earnings, followed by manufacturing, service, and retailing (MSR). The strong Q1 2026 performance in insurance was partly flattered by easy comparisons due to 2025 wildfires, but also benefited from foreign exchange gains. Bill Stone, a contributor to Forbes, highlighted in May 2026 that Abel "demonstrated a deep understanding of Berkshire’s many business units and a commitment to continuous improvement at the annual meeting." Greenskeeper Asset Management echoed this sentiment in its Q1 2026 investor letter, stating, "Greg is hands-on, detail-oriented, and— crucially—willing to engage in the operational friction necessary to drive efficiency... driving margin expansion across Berkshire's diverse operations."

Despite these strategic deployments and operational improvements, Berkshire Hathaway continues to grapple with a formidable cash pile. The company ended the first quarter of 2026 with nearly $400 billion in cash. This enormous liquidity presents both an opportunity and a challenge. Warren Buffett himself acknowledged the difficulty of finding suitable investments, remarking in May 2026 that "Prices for a whole lot of things look very silly." This sentiment underscores the rigorous criteria Berkshire applies to its investments, demanding a clear understanding of the business, its future economics, capable management, and a sufficient margin of safety.

To address the growing cash reserves and enhance shareholder value, Abel has explicitly brought share repurchases back into play. He stated, "We will effectively and efficiently return capital to our owners through share repurchases when the value proposition is compelling." He further elaborated, "We will buy back Berkshire shares when they trade below our estimate of intrinsic value, conservatively determined, ensuring that repurchases enhance per-share value for continuing owners." This commitment to disciplined capital return, alongside strategic acquisitions, provides Abel with multiple levers to deploy Berkshire's vast resources.

Valuation and Market Perception: A Premium Under Scrutiny

Berkshire Hathaway's unique structure and enduring legacy often lead to a valuation that commands a premium, yet recent market performance suggests investors are scrutinizing this more closely in the post-Buffett era. As of May 2026, BRK-B trades at a price-to-book value ratio of 1.42, which is above the industry average of 1.38. This slight premium reflects the market's continued respect for Berkshire's diversified holdings and strong underlying businesses, even as its investment strategy evolves.

However, market sentiment has not been uniformly positive. Shares of BRK-B have lost 4.7% year-to-date as of May 2026, underperforming the broader industry. This underperformance could be attributed to several factors, including the market's initial uncertainty regarding the leadership transition, the conglomerate's exposure to traditional industries, and a general market preference for high-growth technology stocks, which Berkshire has historically avoided. The company has also been a net seller of publicly traded stocks for 14 consecutive quarters, offloading almost $8.2 billion in Q1 2026 alone, which might signal a cautious stance on broader market valuations.

Despite the recent price action, some analysts maintain a positive outlook. Zacks Investment Research, for instance, assigned BRK-B a Zacks Rank #2 (Buy) as of May 2026, indicating a belief in its near-term price performance. This suggests that while the market may be digesting the strategic shifts, the underlying fundamentals and Abel's operational focus are seen as supportive. The tension between a slight valuation premium, recent underperformance, and a positive analyst rank highlights the nuanced perception of Berkshire Hathaway as it transitions into its new chapter. Investors are weighing the stability and cash-generating power of its core businesses against the potential for renewed growth under Abel's more dynamic capital allocation strategy.

The Bear Case: Risks in the Post-Buffett Era

Even with Greg Abel charting a new course, Berkshire Hathaway faces inherent risks that could challenge its long-term value creation. The sheer scale of its operations and the ongoing leadership transition present unique vulnerabilities that warrant careful consideration.

One of the most significant concerns revolves around the company's massive cash pile, which stood at nearly $400 billion in Q1 2026. While a strong balance sheet is generally a positive, such an enormous sum could, as some bears suggest, lead to "less disciplined acquisitions or equity investments, eroding shareholder value." The challenge of deploying this capital effectively without overpaying for assets is substantial, especially given Buffett's own recent comments about "silly" market prices. Any missteps in large-scale capital allocation could weigh heavily on future returns.

Furthermore, critics point to Berkshire's relatively low Return on Invested Capital (ROIC) of 3.5% and Return on Equity (ROE) of 9.8%, as cited by Kavout. These figures suggest that the company's capital might not be utilized as efficiently as it once was, or as effectively as some growth-oriented peers. While Berkshire prioritizes long-term value over short-term metrics, a sustained period of low capital efficiency could dampen investor enthusiasm. The lack of a dividend, a long-standing Buffett philosophy of reinvesting capital, could also deter income-focused investors, particularly if the cash pile continues to grow without significant deployment.

The company's substantial exposure to traditional industries, while providing stability, could also limit its upside in a market increasingly driven by high-growth technology and artificial intelligence. Despite Abel's strategic investments in Alphabet, the core of Berkshire's business remains in sectors like insurance, freight rail, and utilities. The risk of missing out on rapidly evolving sectors, even with a cautious approach to tech, remains a concern for some investors. Moreover, the BNSF railroad, a key operating segment, ranked fifth out of six railroads in profitability by operating margins, though it improved to fourth in Q1 2026. This indicates areas where operational improvements are still needed.

Finally, the leadership transition itself, while expected to be smooth, carries inherent risks. The market will closely scrutinize Abel's decisions, and any perceived deviation from Buffett's legendary discipline could lead to investor skepticism. As Greenskeeper Asset Management acknowledged, "No successor to Buffett can ever hope to replicate his stock-picking genius." While Abel brings a distinct operational focus, the shadow of Buffett's unparalleled capital allocation record is long, and proving his own mettle will be a continuous challenge.

Analyst Consensus: Cautious Optimism for the Transition

The analyst community holds a nuanced view of Berkshire Hathaway, reflecting both its inherent strengths and the uncertainties surrounding its leadership transition. While there's a general acknowledgment of the company's robust foundation, opinions diverge on its near-term growth trajectory and valuation.

Zacks Investment Research, a prominent voice in the market, currently assigns BRK-B a Zacks Rank #3 (Hold) as of June 12, 2026. This rating suggests that the stock is expected to perform in line with the broader market in the near term. The consensus estimate for BRK-B's second-quarter 2026 earnings per share (EPS) has remained unchanged over the past 30 days. For the full fiscal year 2026, the consensus EPS estimate of $20.82 indicates a modest year-over-year change of +1%, though this estimate has seen a +2.8% upward revision over the last month. Looking further ahead, the consensus EPS estimate for fiscal year 2027 is $21.59, representing a projected change of +3.7% from 2026, with a +1.4% revision over the past month. Both 2026 and 2027 revenue estimates indicate year-over-year increases.

This mixed estimate movement—unchanged for Q2 EPS, but upward revisions for full-year EPS and revenues—suggests analysts are cautiously optimistic about Berkshire's ability to generate stable, albeit not explosive, growth under Abel. The Zacks Value Style Score, which evaluates various valuation metrics, grades Berkshire Hathaway B as "C," indicating it is trading at par with its peers.

For Berkshire Hathaway's Class A shares (BRK.A), which are substantially higher in price but represent the same underlying business, Wall Street analysts generally hold a "Hold" consensus. Out of 10 analysts, 5 recommend Hold, 4 recommend Buy, and 1 recommends Sell. The average price target for BRK.A stands at $780,715. While this target is for the Class A shares, it provides a directional insight into the broader sentiment for the conglomerate.

Greenskeeper Asset Management, in its Q1 2026 investor letter, expressed a more direct positive view on Greg Abel's leadership. The firm stated, "Fellow Canadian Greg Abel is now in charge... Greg brings a distinct set of strengths to the CEO role. Greg is hands-on, detail-oriented, and— crucially—willing to engage in the operational friction necessary to drive efficiency." This perspective highlights a belief that Abel's operational focus will translate into improved financial performance, particularly through "driving margin expansion across Berkshire's diverse operations." This endorsement from a disciplined value investor provides a counterpoint to some of the more cautious market views, suggesting that Abel's strategic and operational shifts are being recognized as a positive catalyst for long-term value.

The Verdict: A Calculated Bet on Evolution

Carmignac Gestion's 3% stake in Berkshire Hathaway is more than just an allocation to a stable conglomerate; it's a calculated bet on the strategic evolution unfolding under CEO Greg Abel. The era of Warren Buffett's sole capital allocation has given way to a more dynamic, yet still disciplined, approach that balances traditional value tenets with targeted growth opportunities. Abel's willingness to pivot into AI infrastructure through a significant investment in Alphabet, coupled with his aggressive expansion into undervalued Japanese markets and strategic acquisitions like Taylor Morrison Home, demonstrates a clear vision for Berkshire's future.

This new Berkshire is not abandoning its roots but is adapting to a changing economic landscape. Abel's emphasis on "operational excellence" and driving margin expansion across the company's diverse subsidiaries is a crucial, albeit less visible, component of this strategy. While the stock has faced some headwinds, underperforming the industry by 4.7% year-to-date as of May 2026, the underlying strategic shifts and Q1 2026 operating earnings growth of 17.7% (or 7.2% ex-FX) suggest a foundation for future appreciation. The return of share repurchases as a value-creating tool further underscores Abel's commitment to enhancing per-share value.

For investors looking to participate in this evolving narrative, the current price of $507.78 offers a compelling entry point. The market is still digesting the full implications of Abel's leadership, creating an opportunity to invest in a company that is both financially robust and strategically agile.

Entry Zone: Investors could consider accumulating BRK-B shares in the range of $500.00 to $510.00. 12-Month Target: Based on the derived Class B equivalent of the Class A analyst price target, a 12-month target of $563.78 appears achievable, representing a modest upside as Abel's strategy gains traction and operational improvements materialize. Invalidation Level: A sustained break below the 52-week low of $455.19 would signal a fundamental challenge to Abel's strategic direction and invalidate this thesis.

Berkshire Hathaway under Greg Abel is not just a legacy holding; it's a forward-looking enterprise poised to generate value through a blend of operational rigor and strategic capital deployment. Carmignac's investment is a testament to this calculated evolution.

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