Abel's Berkshire Portfolio Concentration: A Risk or a Benefit?

Greg Abel has been leading Berkshire Hathaway as CEO since January last year, and in that time he's made significant changes to the company's stock portfolio. In his first two quarters at the helm, Abel both increased and decreased holdings, resulting in a concentration of around 60% of its investments in just five companies: Apple, American Express, Alphabet (Google's parent), Bank of America, and Coca-Cola.

This level of concentration is not entirely new, as it was also present under Warren Buffett's leadership. However, Abel has continued to hold onto these long-term positions, including two that Berkshire has held for over 30 years: American Express and Coca-Cola. In fact, the company's holding in Alphabet was increased by a significant $17 billion last quarter.

The five blue chip stocks now account for around 60% of its investments in U.S.-listed equities. While this concentration may be seen as a risk, it's worth noting that these companies are all well-established and have strong fundamentals. Additionally, Berkshire Hathaway's cash position is substantial at $365.5 billion, which would help mitigate any potential losses.

However, there is another risk to consider: performance risk. As Abel continues to make investment decisions, he will be held accountable for the outcome of these choices. This includes upping the ante on Alphabet, a position that was increased by Buffett himself.