Greg Abel Is Spending Berkshire Hathaway's Cash on Whole Companies Instead of Stocks. Here's What That Changes for Shareholders.

Greb Abel's Berkshire Hathaway (NYSE: BRKA) (NYSE: BRKB) is shaping up to be similar to Warren Buffett's, but with the new CEO's signature decisive, bold stamp.

One of the features that stands out in his approach is a focus on acquiring whole companies. That's not anything new; Berkshire Hathaway owned almost 200 businesses outside of its stock portfolio before he became CEO at the beginning of the year. But with its record nearly $400 billion stockpile, Abel is finding greater opportunity in buying whole businesses than stocks.

Let's look at what that means for shareholders.

What's happening at Berkshire Hathaway with Abel at the helm

Abel demonstrated that he's taking a new direction with his portfolio moves in the first quarter. He sold 15 positions, concentrating on its highest-conviction stocks, and bought two new ones: Delta Air Lines and Macy's. Those positions are worth $2.6 billion and $55 million, respectively.

He also tripled the company's position in Alphabet, adding more than $10 billion in Alphabet stock, although Buffett has taken credit for the Alphabet purchase.

Image source: Getty Images.

The company has also purchased two whole subsidiaries since Abel took office. It completed the purchase of OxyChem from Occidental Petroleum for $9.7 billion in January, a deal started when Buffett was still CEO, and it acquired homebuilder Taylor Morrison in June for $6.8 billion.

Buffett praised Abel's dealmaking abilities, saying that Berkshire's new CEO spearheaded the acquisition. "Greg did that faster than I could have done it, smoother than I could have done it, and I never talked to the CEO. He has launched."

The implication is that Abel put more of the company's money into buying whole businesses -- $6.8 billion -- than into buying stocks -- under $3 billion -- in the deals he worked himself.

With $398 billion in cash, there are many opportunities

Investors can speculate about why Berkshire is keeping so much cash, but Buffett said that he simply doesn't see great opportunities in the market. It is certainly richly valued today, and it's driven by artificial intelligence (AI) upstarts, some of which have high valuations and no profits. Those aren't the kinds of investments Buffett or Abel looks for.

With $398 billion in cash, Abel is finding value in whole companies instead. When he buys businesses, their financials get folded into Berkshire's, and shareholders gain from operating results rather than portfolio moves.

This strategy also removes some optionality from the business; you can trade stocks for cash more easily than sell companies. Berkshire also looks to buy companies it can hold forever, and it rarely sells a subsidiary.

Although it's only been one quarter, and it's too early to say this will be Abel's pattern, it dovetails with this model of sticking to bigger plays with greater concentration. And shareholders, as well as Berkshire Hathaway fans, may see more of this activity driving the company's work.

Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool recommends Delta Air Lines and Occidental Petroleum. The Motley Fool has a disclosure policy.