Skip to Main Content Skip to Search This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com. Warren Buffett Is Leaving Berkshire Hathaway in Great Shape for His Successor After Profit Results By Andrew Bary Updated Nov 02, 2025, 9:25 am EST / Original Nov 02, 2025, 2:10 am EST Sh ...

Group 1 - The article emphasizes the importance of building a thoughtful investment portfolio that balances strong growth potential with solid fundamentals [1] - The focus is on high-quality businesses primarily located in the U.S. and Europe, characterized by industry-leading profitability, low leverage, and growth potential [1] - The investment strategy includes a long-term perspective, aiming for financial independence through compounding returns over a 30-year horizon [1] Group 2 - The analyst holds a beneficial long position in shares of BRK.B, VOO, and QQQ, indicating a commitment to these investments [2] - The article expresses personal opinions and does not involve compensation from companies mentioned, ensuring an unbiased perspective [2]

Market Performance - The S&P 500 increased by 0.7% this week, while the Nasdaq rose by 2.2%[1] - Large-cap growth (Russell 1000 Growth) outperformed small-cap growth (Russell 2000 Growth) with a difference of 2.2%[1] - Semiconductor products and equipment led the sectors with a gain of 6.2%[1] Fund Flows - Estimated fund flow for S&P 500 components was -$40.5 million this week, down from +$65.6 million last week[2] - Major inflows were seen in semiconductor products and equipment (+$77.3 million) and retail (+$26.9 million)[2] - Significant outflows occurred in media and entertainment (-$65.2 million) and diversified financials (-$63.2 million)[2] Earnings Forecast - The 12-month forward EPS expectation for S&P 500 components was raised by 0.6% this week, following a 0.4% increase last week[3] - Retail sector EPS was revised up by 2.9%, while energy sector EPS was cut by 1.7%[3] - Overall, 14 sectors saw upward revisions in earnings expectations, while 10 sectors experienced downward adjustments[3]

Group 1: Microsoft Azure and AI Growth - Azure has reached a valuation of $75 billion, with revenue growth accelerating due to increased AI-capable cloud capacity to meet demand [1] - Microsoft has established itself as a leader in generative AI, integrating AI services into Azure and Microsoft 365, which has significantly contributed to business growth [2] - The enterprise software segment is experiencing strong double-digit revenue growth, driven by new AI features that enhance user retention and pricing power [7] Group 2: Bill Gates and the Gates Foundation - Bill Gates plans to donate at least 99% of his wealth through his foundation by 2045, having already contributed billions in Microsoft shares since its inception [5][6] - The Gates Foundation's trust fund is heavily concentrated, with three stocks accounting for over two-thirds of its marketable equity portfolio [4] Group 3: Berkshire Hathaway Investments - The Gates Foundation holds a significant position in Berkshire Hathaway, with 24.1 million Class B shares valued at $11.8 billion [9] - Berkshire Hathaway has shown solid results despite challenges in its insurance business, with operating earnings exceeding expectations [10] - The company has a substantial cash position of approximately $340 billion, allowing for strategic acquisitions like OxyChem for $9.7 billion [12] Group 4: Waste Management Holdings - Waste Management is a long-term holding of the Gates Foundation, with a competitive advantage due to its scale and landfill ownership [14][15] - The company reported strong adjusted EBITDA margins of 38.4%, despite some challenges in its recycling business [16] - Management has provided revenue guidance of $28.5 billion to $29.25 billion for 2027, indicating solid growth prospects [17]

Core Viewpoint - Berkshire Hathaway reported record cash reserves of $381.67 billion as of the end of Q3 2025, marking a cautious investment approach amid leadership transition as Warren Buffett prepares to step down as CEO [1][2][8]. Financial Performance - Total revenue for Q3 2025 reached $94.972 billion, a 2.13% increase from $92.995 billion in Q3 2024 [2][4]. - Net profit for Q3 2025 was $30.796 billion, up 17.31% from $26.251 billion in the same quarter last year [2][4]. - Operating profit for Q3 2025 was $13.485 billion, reflecting a significant increase of 33.65% compared to $10.090 billion in Q3 2024 [4][5]. - For the first nine months of 2025, total revenue was $277.212 billion, with net profit amounting to $47.769 billion [2][4]. Investment Strategy - Berkshire Hathaway has not repurchased any shares for nine consecutive months and has continued to sell stocks, recording $10.4 billion in taxable gains [3][5]. - The company’s investment strategy appears cautious, focusing on finding new opportunities in the current market environment [3][5]. Leadership Transition - Warren Buffett will hand over the CEO position to Greg Abel by the end of 2025, marking a significant leadership change for the company [1][8]. - Buffett will no longer write the annual shareholder letter, a role that will be taken over by Abel [1][11]. Analyst Ratings - Berkshire Hathaway recently received a rare "sell" rating from Keefe, Bruyette & Woods, reflecting concerns over its earnings outlook and the upcoming leadership transition [7][8]. - The downgrade was attributed to macroeconomic uncertainties and the unique succession risks associated with Buffett's departure [8][10].

Core Insights - The article emphasizes the importance of learning from investment failures of renowned investors, highlighting that even experts can fall into common traps that lead to losses [18]. Group 1: Investment Failures - High-tech stocks have historically led to significant losses for investors, with examples including a $25 million loss in data processing companies and other notable tech stocks like Tandem and Motorola [3][4]. - Warren Buffett and Charlie Munger have also experienced failures, such as the investment in a Baltimore department store, which they later recognized as a poor decision due to their lack of understanding of the retail business [5][6][7]. - The article discusses the case of Loyal Insurance Company, which missed out on a bull market in the early 1960s due to conservative investments and later made poor decisions during a bear market, leading to further losses [9][10]. Group 2: Common Investment Traps - The first major trap is investing in areas outside one's understanding, as illustrated by Peter Lynch's losses in high-tech stocks despite acknowledging his lack of knowledge in that sector [18][21]. - Misjudging the nature of a business can lead to investing in "bad businesses" with fierce competition, as seen in Buffett's experiences with the textile industry and jewelry stores, which ultimately failed to generate profits [20][21]. - Emotional reactions to market fluctuations can disrupt long-term strategies, exemplified by Loyal Insurance's erratic decisions during market volatility [21]. - Trusting financial data from companies with low transparency can result in significant losses, as demonstrated by Munger's investment in an Irish bank, which he later regretted due to the ease of financial manipulation in the banking sector [14][21]. - Ignoring industry realities and competitive dynamics can lead to poor investment choices, as seen in Buffett's delayed exit from unprofitable textile operations [20][21].

Group 1: Market Overview - Optimism from trade negotiations and a significant rise in Amazon's stock price contributed to a strong performance of major U.S. indices, marking a robust end to October for Wall Street [1] - The market remains cautious regarding the Federal Reserve's interest rate decisions, which may suppress risk appetite in the upcoming week [1] Group 2: Economic Indicators - The U.S. Conference Board's consumer confidence index fell from a revised 95.6 in September to 94.6, the lowest level since April [2] - The Atlanta Fed's GDPNow model maintains a fourth-quarter GDP growth forecast of 3.9% [2] Group 3: Federal Reserve Insights - The recent FOMC meeting indicated a hawkish stance, with some members opposing further rate cuts, reflecting strong divisions among committee members [2][3] - The market's expectations for potential rate cuts in 2025 have been adjusted downwards, with the probability of a rate cut dropping from 95% to around 60% [3] Group 4: Stock Performance - The "Magnificent 7" tech companies had mixed earnings reports, with Amazon's stock rising by 8.9% and Meta's stock dropping over 12% due to AI-related capital expenditure plans [5] - Berkshire Hathaway's latest earnings report showed a cautious market outlook, with cash reserves reaching a record $381.7 billion [5] Group 5: Market Volatility - The VIX index has risen for five consecutive days, indicating increased demand for hedging against risks through put options on the S&P 500 [6] - The upcoming week will continue to see earnings reports, with a focus on the sustainability of capital expenditures in the AI sector [6]

Berkshire Hathaway’s cash hoard soared to a record in the third quarter as the company's operating earnings also grew. https://t.co/7Icj0yEGcF ...

Warren Buffett's the goat of capitalism. I mean, is there anybody that's done it better. And how fortunate are we as a brand to to be owned by Berkshire Hathaway.There's so much guidance and wisdom that we've had from Warren over the years. And now Greg is stepping into this role and I couldn't be more happy to to be supported by Berkshire. I always say I've got the greatest job in the industry because of our ownership structure. ...

Core Insights - Warren Buffett's impending departure as CEO of Berkshire Hathaway has raised investor concerns, leading to an 11.5% decline in the company's B shares since the announcement in May [1] - Despite the stock's underperformance, Berkshire reported a 34% year-over-year increase in operating profit to $13.49 billion in Q3, driven by a significant rise in insurance underwriting income [2] - Analysts have downgraded Berkshire's A shares from "market perform" to "underperform," citing concerns over succession risk and the potential impact of Buffett's exit on investor confidence [4] Financial Performance - Operating profit from core businesses surged 34% year-over-year to $13.49 billion in Q3, with insurance underwriting income increasing over 200% to $2.37 billion [2] - Berkshire's Class A and Class B shares have gained approximately 5% this year, lagging behind the S&P 500's 16.3% rise [3] Analyst Sentiment - Keefe, Bruyette & Woods analysts downgraded Berkshire's A shares and reduced the price target from $740,000 to $700,000, attributing the stock's underperformance to Buffett's upcoming exit [4] - Analysts highlighted Berkshire's "historically unique succession risk," emphasizing the potential challenges the new CEO, Greg Abel, may face in maintaining investor trust [4] Leadership Transition - The transition to new CEO Greg Abel represents a significant change in leadership, with concerns about how this will affect investor confidence and company performance [6] - Abel will take over the responsibility of writing the annual letter to shareholders starting next year, a role previously held by Buffett [5]