Abel's Berkshire Unleashes $37.7 Billion Bet on Alphabet

Greg Abel's leadership change at Berkshire Hathaway has brought about a significant shift in the company's capital-allocation strategy. Unlike Warren Buffett's era, where Berkshire was a net seller of equities, Abel is now aggressively deploying the conglomerate's capital.

The most notable evidence of this new approach is Berkshire's buying spree, which includes its $6.8 billion acquisition of Taylor Morrison and its increased stake in Lennar. The company has also boosted its investment in Alphabet to approximately $37.7 billion, making it the third-largest holding in the portfolio.

The timing of Berkshire's move into Alphabet is interesting, given that Google's parent company is currently under scrutiny for its spending plans. However, analysts point out that Alphabet's competitive position and dominant market share make it an attractive investment opportunity.

Berkshire's new strategy rests on a solid operational foundation, with the company reporting second-quarter operating earnings of $12.98 billion. Despite this, the stock has underperformed the market, closing at €654,000 in German trading, up 0.9% on the day and 2.7% year to date.

Analysts point out that Berkshire's cash reserve stood at a staggering $365.5 billion as of June 30, and the company still pays no dividend. Share buybacks totaled $4.5 billion in the second quarter, but this pace is slower than earlier periods.