Latest news with #CEOtransition
Globe and Mail
2 days ago
- Business
- Globe and Mail
Is Berkshire Hathaway Stock a Buy Now?
It has been a few weeks since Warren Buffett shocked Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) investors by announcing his intention to step down as CEO at the end of 2025 after more than 60 years at the helm of the massive conglomerate. Berkshire's stock reacted negatively after the announcement and remains about 7% below where it was before the company's annual meeting, where the news was revealed. And it's worth noting that this is during a period when the S&P 500 gained about 2%. Obviously, the leadership of the legendary billionaire investor is a big reason many people own the stock. However, the company's succession plan has been in place for a long time, and in the foreseeable future, not much is really changing even though Warren Buffett is stepping down. So here's a summary of why I'm not planning to sell a single share of Berkshire, and why investors may want to consider adding after the post-Buffett dip. A diverse and recession-resistant portfolio, all in one stock Berkshire Hathaway owns more than 60 subsidiary business, according to its website, and it's important for investors to realize that all of its businesses have their own leadership teams that largely operate independently of Berkshire's central office. In other words, Buffett has virtually nothing to do with the day-to-day operations of GEICO, Dairy Queen, Duracell, or any of Berkshire's other businesses. Ajit Jain has been in charge of insurance operations, and Greg Abel, the incoming CEO, has already been in charge of non-insurance operations, so there really isn't that much changing with Buffett's departure. Most of Berkshire's businesses are rather recession resistant. For example, GEICO will keep collecting auto insurance premiums and Berkshire Hathaway Energy will receive payment for its utility services, even in an economic downturn. In addition to its businesses, Berkshire has a large portfolio of common stocks, as well as about $348 billion in cash on its balance sheet. The stock portfolio is managed by Buffett along with two portfolio managers, Todd Combs and Ted Weschler, and while Abel will have the final say on capital allocation, it's likely that the two managers will play a somewhat larger role in the stock portfolio. They've both established solid track records of stock-picking so far, and this could ultimately be a net positive for investors, as both have a somewhat more modern (that is, tech-centric) stock approach. Finally, Berkshire's cash gives management unprecedented financial flexibility to take advantage of opportunities as they arise. However, with interest rates still relatively high and the cash stockpile earning well in excess of $10 billion in annual interest income for Berkshire, Abel and his team aren't likely to be in a big rush to put it to work. But if a recession or market crash arrives, no company will have as much financial firepower as Berkshire. It's cheaper than you might think At the current share price, Berkshire has a market cap of $1.085 trillion, making it the only non-technology company in the trillion-dollar club. But just because it has a 13-figure valuation doesn't necessarily mean it's an expensive stock. Here's why. Two of the three components of Berkshire are very easy to value. It has about $348 billion in cash, and the current market value of the stock portfolio is just under $277 billion as of this writing, not including an undisclosed "secret stock" position Berkshire is accumulating. Backing these two numbers out of the valuation shows that the market is valuing Berkshire's operating businesses at $460 billion. Over the past four quarters, the company has produced about $33 billion in operating profit, excluding investment income, which mainly comes from interest on its cash. So that means Berkshire trades for less than 14 times earnings, at least in terms of its fully owned businesses. Plus, there's a big case to be made that Berkshire could unlock significant profitability from its massive insurance business by improving its technology. The bottom line I've said before that if I could only own one stock, it would be Berkshire. And although I own far more than just one stock, Berkshire is one of my largest investments and I have no plans to change that. I'd even go so far as to say that it's never a bad time to buy shares of Berkshire. It holds up better than most other stocks during most downturns and has a solid history of coming out even stronger on the other side. The bottom line is that Berkshire offers a diverse collection of rock-solid businesses all in one investment, and it has unmatched financial flexibility. With all the right pieces in place for continued success, Berkshire Hathaway could be a smart buy on any weakness. Should you invest $1,000 in Berkshire Hathaway right now? Before you buy stock in Berkshire Hathaway, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,389!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $830,492!* Now, it's worth noting Stock Advisor 's total average return is982% — a market-crushing outperformance compared to171%for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of May 19, 2025
Entrepreneur
22-05-2025
- Business
- Entrepreneur
Why CEO Transitions Fail — And How Boards Can Stop It
Leadership is hard, and transitions to CEO are even harder. Even great CEOs stumble if not supported by the board during their psychologically difficult transition. Opinions expressed by Entrepreneur contributors are their own. The CEO's transition is a major psychological event — an identity shift that reorders their sense of self and often even their sense of meaning in life and work. But while most of the spotlight falls on the CEO, there's another character who determines much of the outcome: the board of directors. What happens in the early months between a new CEO and the board drastically influences the long-term outcome. A board that is simply an evaluator of the CEO will plant seeds of failure early on. In contrast, a board that steps into the role of partner and coach can help transform the CEO's psychological turbulence into clarity and, by extension, leadership effectiveness. In other words, CEO transitions don't succeed because of a single great leader. They succeed when the group of people at the top is an effective team. And no part of the team is more influential in shaping the CEO's transition than the board. Related: 5 Steps for a Smooth and Successful (CEO) Exit Stepping into the unknown Research shows that over half of newly appointed CEOs fail within 18 months. Many point to culture mismatch, unclear expectations or misaligned visions between the CEO and the board. However, there is a deeper psychological truth: transitions destabilize identities and role relationships — not just for the CEO, but for everyone involved. Psychologist William Bridges famously described transitions as consisting of three parts: the ending of an old identity, the "neutral zone" of uncertainty and the emergence of a new beginning. The same is true in organizations. When a CEO changes, the company enters an uncertain space filled with problems and trepidations. The previous regime's story has closed, but the new one hasn't yet taken shape. Now, it's time to shape that story – the hero's journey. And the board is not an observer; it's a co-author of the next chapter. Its role is not just functional - it's psychological. The CEO's identity crisis The moment a new CEO steps into the job, they undergo a phenomenon psychologists call "identity disequilibrium." Their previous role is over. But the "CEO self" hasn't fully formed. Impostor syndrome spikes in high performers who are used to mastery. At the same time, their internal compass begins spinning. It's an overwhelming situation to be at the very top of an organization. They ask themselves: What should I prioritize? How bold should I be? What will this board support or punish? Will I meet expectations and be as good as the last CEO? Here, the board becomes more than a governance body. It becomes a mirror of the company's history. The board reflects the company's implicit beliefs about what and who a CEO should be. If that reflection is distorted, if expectations are unclear or contradictory, it sends the CEO into deeper disorientation rather than clarity. Conversely, if the board is aligned and transparent, it becomes a stabilizer during the transition - a foundation of psychological stability. It can help the CEO clarify not just what to do, but who to be. Related: 3 Ways to Navigate the Journey from Entrepreneur to CEO Why alignment is emotional, not just strategic We hear about the need for board–CEO alignment on strategy, performance metrics or goals. This is what people inside businesses talk about. But the real alignment, like in all human relationships, is emotional. This includes: Shared understanding of identity: What kind of leader do we want the CEO to be? A change agent like Steve Jobs? A steward of tradition like Kay Whitmore from Kodak? A hard charger or an enabling leader with empathy? Without consensus on role expectations, the CEO receives conflicting feedback, which amplifies an already anxiety-laden situation. What kind of leader do we want the CEO to be? A change agent like Steve Jobs? A steward of tradition like Kay Whitmore from Kodak? A hard charger or an enabling leader with empathy? Without consensus on role expectations, the CEO receives conflicting feedback, which amplifies an already anxiety-laden situation. Psychological safety: Does the board offer the CEO a space to be vulnerable and have productive conflict, as well as receive real feedback? Can the CEO ask naïve questions, admit doubts or test bold ideas without fear of judgment? Boards that offer this kind of psychological environment give the CEO room to learn and grow instead of forcing them to pretend they have everything under control, when they don't. Does the board offer the CEO a space to be vulnerable and have productive conflict, as well as receive real feedback? Can the CEO ask naïve questions, admit doubts or test bold ideas without fear of judgment? Boards that offer this kind of psychological environment give the CEO room to learn and grow instead of forcing them to pretend they have everything under control, when they don't. Respect for personal "why": Great boards ask their CEOs what drives them deep down inside. What big problem are they trying to solve? What kind of legacy do they want to leave? When a board links its organizational goals to the CEO's core purpose, the CEO's commitment skyrockets and, with support from the board, they leverage this energy to catalyze the company. The board as cultural translator Every company has an invisible operating system: its culture. For a new CEO, entering this system can feel like landing in a foreign country. It's a culture shock. There are unspoken rules, taboos, rituals and metaphors. There is an entire system of beliefs about what is right and wrong. If no one explains these hidden rules to the CEO, and they were hired from the outside, this becomes a dramatic stumbling block in the leader's transition. Boards have a unique vantage point and an obligation to past on this very important information. In a successful transition, the board acts as the CEO's cultural interpreter. Not to constrain them, but to orient them. "Here's what matters here." "Here's how people think." "Here's what will gain trust and what will lose it." This guidance allows the CEO to avoid landmines while still charting their own course. Related: These are the Signs of a Toxic Company Culture The board's balancing act Silence is never neutral. When a board fails to engage early in a CEO transition, the vacuum gets filled with mistrust. The CEO wonders: Am I on track? Do they like what I'm doing? Should I move faster? Slower? This silence is not due to malice but to uncertainty. The board may assume it should "give the CEO space." But in the early days, that's precisely when the CEO needs the most engagement, as long as it's healthy engagement. Conversely, when boards overstep, such as micromanaging the CEO or contradicting themselves, they erode confidence and degrade psychological safety. The CEO becomes reactive, second-guessing decisions or even looking for approval from the board on simple decisions. Creativity shuts down. Risk-taking and entrepreneurialism vanish. A downward spiral begins because the team isn't effectively working together. The best approach is structured transparency. Boards and CEOs should co-create an agreement in the first month: Here's what success looks like. Here's how we'll talk. Here's how we'll disagree. This is how much we'll be involved and where we'll step in to make decisions versus give the CEO space. The alignment session is a ritual worth having One of the most effective tools in CEO transitions is a Board–CEO alignment session. As a coach, I do this with all CEO transition clients. This is not just a check-in or a nice-to-have meeting. It's a facilitated, confidential deep dive where the CEO and board examine the company's strategy, culture, priorities, governance style and operating cadence. Such sessions allow for three critical things: Surfacing hidden assumptions. Directors may realize they don't actually agree on the CEO's mandate or on what the company needs next. Better to discover that early. Normalizing emotion. These sessions often allow for honesty: "Here's what excites me, here's what worries me." This humanizes the relationship. Creating a shared narrative. When the board and CEO craft a story of where the company is headed and what kind of leader it needs, they co-create meaning. And that meaning fuels alignment. Transitions are psychological People tend to think of CEO transitions as a business event. But underneath they are deeply psychological (like everything else). A new CEO is taking on the job of their lifetime, and it's a big job that comes with an unreal amount of stress. The science of identity, meaning and psychological safety offers powerful tools for making these transitions successful. Boards that embrace their role as coach and partner, not just overseers of performance, help CEOs tackle a tough time and emerge more whole, more self-aware and more effective. The most important question a board can ask during a transition isn't "Are we meeting our financial targets?" It's "Are we helping this leader become who they need to be?" When that happens, alignment is no longer a surface-level outcome to get things done at work or achieve financial goals. It's a strong emotional bond wrapped in shared meaning that energizes passion and focuses it toward the company's vision. And that meaningful pursuit cascades out to everyone else.
Bloomberg
18-05-2025
- Business
- Bloomberg
Buffett to Skip Stage at 2026 Annual Meeting, Omaha Paper Says
Warren Buffett will not take the stage at the Berkshire Hathaway 2026 annual meeting, preferring instead to let his successor have the spotlight after he retires, the Omaha World-Herald reported. Buffett, 94, announced at the end of this year's meeting two weeks ago that he would be stepping down as CEO of the conglomerate he founded but would remain chairman of the board.
Yahoo
17-05-2025
- Business
- Yahoo
Down 59%, Is UnitedHealth Group Stock a Buy on the Dip?
UnitedHealth Group announced a surprise CEO transition on May 13. Shares of the integrated health insurance business are down by more than half from the all-time high it reached last year. UnitedHealth Group misjudged utilization trends in 2025, but this doesn't seem like a problem it can't solve in 2026. 10 stocks we like better than UnitedHealth Group › Over the past year, America's typically predictable health insurance industry has been exciting in ways that investors hardly appreciate. In a nutshell, healthcare expenses have been outpacing the monthly premiums that insurers collect. Rising utilization rates have affected the entire industry, but one company has been particularly bad at anticipating the trend. On May 13, UnitedHealth Group (NYSE: UNH) suspended its 2025 outlook and announced the immediate departure of CEO Andrew Witty. On May 15, shares of America's leading health insurance benefits manager fell to a level 59% below the peak they reached about six months earlier. The stock has collapsed because nobody seems to know just how bad utilization rates have become. When UnitedHealth Group reported first-quarter results on April 17, management adjusted its 2025 earnings outlook from a range between $28.15 and $28.65 per share down to a range between $24.65 and $25.25 per share. Management teams can and often do revise guidance from quarter to quarter. However, you almost never see a well-established business like UnitedHealth Group walk back guidance less than a month after providing it. In an unusual conference call on May 13, UnitedHealth suspended earnings guidance without providing any revised figures. The company's President and CFO John Rex highlighted the main issues that are squeezing profit margins. First, the health status of new members isn't as robust as hoped. In April, the company said it expected to serve 650,000 new value-based care patients. Rex's remark suggests these patients are getting a lot more value than UnitedHealth had intended. Rex also complained that utilization within the company's Medicare Advantage program had accelerated even further than previously anticipated. He didn't go into specifics but said the trend is broadening to other areas. We don't know how low the next earnings-guidance revision will go but can be fairly confident that UnitedHealth Group's bottom line will return to growth over the next few years. It mis-priced premiums for 2025, but its customers can expect a bigger monthly bill in 2026. Management is already incorporating the higher costs it's been experiencing into 2026 Medicare Advantage bids that are due in June. Most Americans don't get to decide which insurance company receives over $1,000 per month in premiums from them and their employers. For employers who do have options, though, UnitedHealth's integrated-care strategy can offer savings that its smaller, less-integrated competitors can't match. In 2023, United Health's Optum Health employed around 10% of America's physicians. It's been a while since management shared this figure, but it's likely the largest employer of physicians in the country. Optum RX, its pharmacy benefits management business, is one of the three largest, which gives it a very strong position from which to negotiate. Shares of UnitedHealth Group have been beaten down to the ultra-low valuation of just 10.7 times trailing earnings. Unfortunately, Earnings could go down to a shockingly low figure this year, but this likely isn't a permanent situation. Passing heightened-care expenses to consumers by raising premiums and deductibles is nothing new for this company. With its stock price severely depressed, UnitedHealth Group's typically minuscule dividend yield has risen to 3.3% at recent prices. The company raised its payout by 320% over the past decade. Dividend payout raises in 2025 and 2026 might be smaller than usual, but maintaining the payout probably won't be an issue. Even if 2025 earnings shrink by half, there would be more-than-enough profit to support a dividend currently set at an annualized $8.40 per share. Management didn't provide forward-looking guidance for 2025 but believes it can reliably generate earnings growth at a double-digit percentage over the long run. Even if earnings only creep forward by a mid-single-digit percentage, an investment at these beaten-down prices could lead to market-beating gains for patient investors. Before you buy stock in UnitedHealth Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and UnitedHealth Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $620,719!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $829,511!* Now, it's worth noting Stock Advisor's total average return is 959% — a market-crushing outperformance compared to 170% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 12, 2025 Cory Renauer has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy. Down 59%, Is UnitedHealth Group Stock a Buy on the Dip? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Entrepreneur
15-05-2025
- Business
- Entrepreneur
Warren Buffett Reveals Why He's Retiring as Berkshire CEO
Warren Buffett, 94, surprised investors earlier this month when he announced at Berkshire Hathaway's shareholder meeting in Omaha, Nebraska, that his nearly 60-year career as CEO was ending. Buffett's successor, Greg Abel, 62, will take the reins on Jan. 1, 2026, though Buffett will continue as chairman of Berkshire's board. Buffett revealed his decision to step down as CEO in the final five minutes of a five-hour question-and-answer session. Now, new details have come to light about why Buffett decided to pass the torch to Abel—and it has to do with his age. "How do you know the day that you become old?" Buffett told The Wall Street Journal in an interview on Wednesday. "I didn't really start getting old, for some strange reason, until I was about 90. But when you start getting old, it does become—it's irreversible." Related: Warren Buffett Says to Forget About 10,000 Hours of Practice — If You Want to Master Something, Do This Instead Buffett told the WSJ that, in the last few years as he crossed his 90th birthday, he had started feeling the effects of his age. He had trouble remembering names and found it more difficult to read newspapers, which suddenly looked like they had unclear text. Buffett was born in Omaha in 1930 and took control of Berkshire Hathaway, then a textile maker, in 1965 when he was just 34 years old. He became CEO and chairman of the company in 1970 and turns 95 in August. Berkshire Hathaway chairman Warren Buffett. Photo by Daniel Zuchnik/WireImage Buffett told WSJ that he never intended to be Berkshire's CEO for life and was "surprised" at how long his tenure had lasted. He also observed that his days had slowed down, while Abel brought more energy to the table and accomplished more during a workday. Related: Warren Buffett's Successor, Greg Abel, Outlined Berkshire Hathaway's Critical Values at the Company's Annual Meeting. "The difference in energy level and just how much he [Abel] could accomplish in a 10-hour day compared to what I could accomplish in a 10-hour day — the difference became more and more dramatic," Buffett told WSJ. Buffett said that Abel was "so much more effective" in handling day-to-day operations at Berkshire that "it was unfair, really," not to have him serve as CEO. Abel joined Berkshire in 1999 after the firm acquired MidAmerican Energy Holdings, an energy company where he served as an executive. Buffett made Abel Berkshire's vice chairman of non-insurance operations in 2018. At a shareholder meeting in 2021, Buffett disclosed that Abel would succeed him as CEO. Buffett told WSJ that he plans to keep working at Berkshire and says his health is in good shape. Related: 'Father Time Always Wins': Warren Buffett, 94, Just Announced Major Changes to His Plan to Give Away His Money
