Here's My Top Stock Pick (and Biggest Holding) for 2026

Core Viewpoint - Berkshire Hathaway's substantial cash reserves position it as a strong alternative to the current AI spending boom, allowing it to capitalize on future opportunities while maintaining solid business performance without heavy AI investments [2][3]. Group 1: Financial Position - By the end of Q3 2025, Berkshire held approximately $382 billion in cash, cash equivalents, and short-term U.S. Treasuries, an increase from about $334 billion at the end of 2024, reflecting a strategy of net selling equities and strong performance from its non-insurance subsidiaries [4]. - The company's operating earnings for Q3 2025 were $13.5 billion, representing a year-over-year increase of about 34%, indicating robust underlying business performance [5]. - Berkshire's cash hoarding strategy contrasts with the aggressive spending seen in the tech sector, leading to underperformance relative to the S&P 500 and many AI investments in 2025 [7]. Group 2: Leadership Transition - Warren Buffett plans to step down as CEO at the end of 2025, with Greg Abel set to take over, which is viewed as a potential catalyst for the company rather than a negative development [9][10]. - The leadership transition occurs at a time of high liquidity and optionality for Berkshire, providing Abel with significant opportunities to enhance the company's performance [11]. - Buffett has expressed confidence in Berkshire's long-term prospects under Abel's leadership, emphasizing the company's established culture and liquidity [11]. Group 3: Strategic Options - Berkshire's liquidity, nearing $400 billion, positions it well to take advantage of potential market dislocations caused by AI spending leading to overcapacity or a market sell-off [12]. - The company could increase share repurchases significantly due to its cash reserves, or initiate dividends if cash levels become excessive, although it is likely to prioritize waiting for investment opportunities [13][14]. - The stock is currently trading at 1.6 times book value, indicating low market expectations, which may present a favorable investment opportunity [15].