Key Points
Abel deployed tens of billions of dollars in capital last quarter across multiple investments.
These three large purchases have all produced very positive results for Berkshire so far.
It’s only been one quarter, but investors should have confidence in Abel.
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Greg Abel has some big shoes to fill at Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB). As the new CEO, he’s in charge of the company’s massive portfolio of marketable equities. He’s also responsible for identifying new opportunities to acquire wholly owned subsidiaries for Berkshire and for creating strategic partnerships. Not to mention ensuring the current group of operating businesses stays on track.
Greg Abel probably won’t be able to replicate the success of Warren Buffett. Buffett himself would probably struggle to match his own track record. But Abel made three big moves at Berkshire in his first quarter, deploying billions in capital, and they’ve all been great successes so far.
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Here are the three investments that set Abel off on the right foot as CEO.
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1. Oxychem
Berkshire Hathaway agreed to acquire Oxychem from Occidental Petroleum (NYSE: OXY) last October when Buffett was still CEO, but the deal didn’t close until January. Greg Abel was instrumental in negotiating the deal in which Berkshire paid Occidental $9.7 billion in cash for its chemicals business.
The deal was a success from the start. Abel and Buffett agreed to acquire the company when the chemical industry was near the bottom of an earnings cycle. It paid an estimated 8 times OxyChem’s 2025 EBITDA. That was roughly in line with other chemical stocks like Eastman Chemical and Dow at the time.
Both comparables have seen their valuation multiples expand in 2026 amid the ongoing conflict in Iran. With the Strait of Hormuz closed, international commodity supply chains have been disrupted, giving American chemical producers significant pricing power. OxyChem could also benefit from its planned modernization efforts for its facilities, improving cash flow and earnings on top of the pricing improvements.
Berkshire has very likely seen excellent operating results from OxyChem in its first quarter under the conglomerate’s umbrella. The cherry on top of the deal is that Berkshire was able to retain its preferred shares of Occidental Petroleum, continuing to receive an 8% dividend on about $8.3 billion.
2. Tokio Marine
Abel made a smart, successful investment while bolstering and expanding its core insurance business by striking a strategic investment in Tokio Marine (OTC: TKOMY). Berkshire paid $1.8 billion for a 2.5% stake in the Japanese insurer and received permission to increase its stake to 9.9% by buying shares on the open market. Additionally, the two agreed to a quota-share agreement under which Berkshire subsidiary National Indemnity absorbs some of Tokio Marine’s insurance risk. That could produce further upside to the investment, assuming good underwriting.
Investors cheered the investment, sending Tokio Marine shares higher after the companies disclosed the deal. However, Berkshire arguably paid a premium for the stock, roughly two times book value. Smaller Japanese non-life insurers trade closer to book value.
Tokio Marine produced solid results last year. Underlying profit climbed 17% year over year, thanks to good momentum in international markets. Adjusted earnings per share climbed 11% year over year, and management guided for similar profit growth this year. The Berkshire alliance has given the company more room to return capital to shareholders through dividends and buybacks, further supporting the stock price and earnings per share. So, it might be worth the significant premium it fetched from Abel.
So far, it’s safe to say the strategic investment is off to a good start.
3. Alphabet
Abel’s largest marketable equity investment in the first quarter builds on a position established last year under Buffett’s watch: Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). Abel tripled Berkshire’s position in the stock, pushing it to become the company’s fifth-largest marketable equity position. Abel spent an estimated $11 billion on the stock last quarter, and Berkshire’s total stake is worth about $22.5 billion as of this writing.
Abel’s decision to add to Alphabet came with impeccable timing. The market’s April recovery and blowout first-quarter earnings results at the end of that month sent the stock price soaring. The stock is up roughly 35% since the end of last quarter.
Alphabet is seeing strong financial results from its artificial intelligence efforts. Google Cloud revenue growth accelerated to 63% in the first quarter with operating margin expanding to 32.9% from 17.8% a year ago. With continued increases in capital expenditures planned for the year, revenue could continue to accelerate further. What’s more, strong demand for Google’s custom AI accelerators, TPUs, and its Gemini-based AI services could lead to even more operating margin expansion.
Alphabet is also seeing positive financial results from integrating its AI models into its core Search and advertising business. AI Overviews and AI Mode have increased engagement with Google Search, creating more opportunities to monetize users. What’s more, Gemini models have improved the company’s ability to understand user intent, leading to more relevant search results and better advertisements. Meanwhile, generative AI tools make it easier for marketers to create and target new ad campaigns, thereby improving their results. The result has been accelerating Search revenue growth, which reached 19% last quarter.
Overall, the company looks poised to produce strong revenue and earnings growth for the foreseeable future. With the stock trading for just 27 times forward earnings estimates, it wouldn’t be a surprise to see Abel continue adding to the position despite the strong performance so far.
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Adam Levy has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
