Where Will Berkshire Hathaway Be in 5 Years?

Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) is one of the most closely watched stocks on Wall Street. Its CEO, Warren Buffett, is one of the most followed investors of the modern era.

The next five years could be very transformative for Berkshire Hathaway. Here are two potentially large changes to watch for.

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Berkshire Hathaway had a big 2024 in one important way

Investors were watching Berkshire Hathaway all year long in 2024, which isn't unusual. But there was one financial statement that seemed to make the news more than any of the others: the balance sheet. The giant conglomerate started the year with nearly $168 billion in cash. That's a lot of money, to be sure, but the cash hoard only went higher from there.

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In the second quarter, thanks largely to asset sales within the company's stock portfolio, the cash balance increased to roughly $277 billion. It went up to $325 billion in the third quarter. And Berkshire Hathaway's balance sheet ended the year with $334 billion worth of cash and short-term investments on it. In one year, Buffett and his team nearly doubled the cash they had available to them for investing.

There are any number of reasons for why the cash hoard might have been raised, with the real reason remaining unknown, since Buffett isn't offering an explanation. However, there are two things that are important about Buffett's investment approach.

First, he is happy to hold cash if he can't find anything to buy. Second, when he finds something to buy, he has no problem making a sizable investment, including buying entire companies.

Five years is a long time on Wall Street. The broader markets are somewhat volatile right now, and it is entirely possible that there will be a bear market sooner rather than later. If that happens, it is highly likely that Berkshire Hathaway puts that cash to good use, expanding its already massive company portfolio. That money could be used to buy publicly traded stocks or entire companies, but either way, it is reasonable to expect big news out of the company on this front.

Data by YCharts.

What about Warren Buffett?

The next issue that could come to the fore over the next five years involves Warren Buffett himself. He has been a mainstay on Wall Street for decades, providing shareholders with market-beating returns and earning him the nickname the Oracle of Omaha. But today, after such a long and incredible run, he is 94 years old, having been born in 1930 (he'll be 95 in August). To give some idea of how long that is, he was born during the Great Depression.

Buffett's longtime partner Charlie Munger passed away in 2023 at age 99. So concerns about Buffett's health are not the least bit out of context. In five years he would be around 99, long past the average U.S. lifespan, which is a little under 80 years. Buffett is an above-average investor, but he most certainly isn't going to live forever.

It seems highly likely that the board of directors will attempt to find and install his successor in the next five years. That could be out of choice or necessity. Right now, Buffett is working closely with Greg Abel, who he has clearly stated will replace him.

The change in leadership will be huge news, but investors should pay more attention to where the new CEO was trained. A huge portion of that training has come at Berkshire Hathaway and at the hands of Warren Buffett. All in, it may not be a big deal from a business perspective, but you'll want to watch closely just the same.

A lot could change very quickly at Berkshire Hathaway

On the business front, if Berkshire Hathaway has the opportunity to put its cash to work, it most likely will. And it could be a big splash, given the amount of cash on hand today.

That will be important to watch, of course, but the changes on the management side of the picture could be even bigger news. The next five years could easily be when the CEO transition finally happens. It isn't clear what that will mean for the company or the stock, given that Warren Buffett is so closely associated with Berkshire Hathaway right now.

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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.