Greg Abel's Latest Pick Speaks Volumes About Berkshire Hathaway's New Strategy
Written by James Brumley for The Motley Fool -> New Berkshire Hathaway CEO Greg Abel is already doing things very differently than predecessor, Warren Buffett. The conglomerate seems at least as interested in outright ownership of promising, high-quality companies as in equity-
New Berkshire Hathaway CEO Greg Abel is already doing things very differently than predecessor, Warren Buffett.
The conglomerate seems at least as interested in outright ownership of promising, high-quality companies as in equity-based partial exposure.
This strategy may offer better, more predictable value to Berkshire shareholders and provide more reliable cash flow to Berkshire Hathaway itself.
Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) continues to evolve under CEO Greg Abel's leadership. Sure, the recently announced addition of another $10 billion worth of Alphabet stock is an obvious change. But it's not a particularly noteworthy one, in that Berkshire already owned more than $20 billion worth of Google's parent company.
Rather, the latest pick that speaks volumes about Berkshire's new direction is Sunday's news that it's acquiring the entire publicly traded Taylor Morrison Home (NYSE: TMHC) for $8.5 billion. It will then delist its stock, making it a wholly owned private holding. It's another layer of evidence that Abel and his lieutenants are losing interest in being mere shareholders and, ultimately, at the mercy of the market, and would rather outright own businesses they can control.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
It's certainly not out of place at Berkshire. The conglomerate already holds stakes in building materials outfit Louisiana Pacific and has recently purchased shares of homebuilder Lennar . Privately, it owns Acme Brick Company, Clayton Homes, and Home Services of America; it's clearly no stranger to the residential real estate business and will obviously benefit from the nation's current housing shortage. (J.P. Morgan analysts believe it could take up to 10 years to shore up the nation's shortage of an estimated 2.8 million homes, for perspective.)
That's not the noteworthy nuance of the decision to acquire homebuilder Taylor Morrison in full, however. No, rather than expanding its stake in Lennar or stepping into one of several other homebuilding stocks, Abel opted to take complete control of one of these names by privatizing a publicly traded company .
