Where Will Berkshire Hathaway Be in 5 Years?

Key Points

• Buffett’s lingering disinterest in buying into any publicly traded outfits may be a sign of a bigger challenge.

• Incoming CEO Greg Abel may be more actively involved in the management of Berkshire’s individual companies than Buffett was.

• Regardless, this stock’s still a compelling investment prospect and perhaps especially so right now.

• 10 stocks we like better than Berkshire Hathaway ›

Nobody has a crystal ball, including investors. And the clichéd warning is correct: Past performance is no guarantee of future results.

Still, some thoughtful consideration of the known facts can paint a pretty good picture of where a company and its stock are likely to be down the road.

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Where might the future take Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) over the course of the coming five years? Keep reading.

Despite the hype, it's less about stocks than you think

There's the Berkshire you know. That's the company that holds CEO Warren Buffett's favorite stock picks. Right now, these include Apple, Bank of America, Coca-Cola, and a couple dozen other positions. Lots of investors will occasionally borrow one or two of these investing ideas for themselves.

Then there's the Berkshire you probably don't know. This is also a conglomerate that owns a large number of private companies like insurer Geico, railroad BNSF, Dairy Queen, Pilot travel centers, Duracell batteries, Fruit of the Loom, Shaw Flooring, and other slow-growth cash cows. Indeed, the combined value of these non-publicly traded businesses is greater than the total value of its stock holdings. Subtracting its $295 million worth of stocks and its $348 billion cash hoard from Berkshire Hathaway's current market cap of $1.04 trillion implies its privately owned businesses are collectively worth around $397 billion. What makes this math even more impressive is the fact that these companies produced a total of $47.4 billion worth of operating earnings in 2024, up from 2023's figure of $37.4 billion.

Connect the dots. Contrary to a common assumption, most of the conglomerate's ordinary income doesn't come from the dividends its stock holdings pay.

Whatever the case, with Buffett set to step down as Berkshire's CEO (and chief stock-picking guru) at the end of this year and pass the reigns to Greg Abel, at least some degree of change is inevitable. Some of it will likely be for the better, while other changes might initially be for the worse. Either way, now's the right time for investors to think about what the future holds.

Three five-year predictions for Berkshire Hathaway

Take any and all predictions of the future with a grain of salt. Some or all of them might not come to fruition. Or something else may unexpectedly take shape. Given what we do know about Berkshire, Buffett, Abel, and the way the market environment is changing, there are three possible developments that seem more likely to materialize than not.

More private investments, fewer publicly traded ones

At the risk of waxing philosophical, I think there may be a bigger reason Buffett has been increasingly hesitant to put Berkshire's enormous cash stash to work. It's not simply a matter of not being able to find a business he likes at a price he can accept; it may be a sign that the stock market itself is losing its ability to supply compelling investments.

Think about it. Many of the best prospects are moving back into the private market or never going public in the first place. Skechers and Walgreens are just a couple of recent examples. Both are escaping public shareholders' often misguided scrutiny by virtue of being privatized.

Of course, some companies will still prefer to tap public markets for capital and founder cash-outs. More and more, though, capital-hungry businesses are finding the ever-volatile and ever-fickle stock market to be more trouble and less reliable than private credit or private equity funding. That's why Blackrock believes the global private-markets business is set to grow from $13 trillion now to over $20 trillion by 2030.

Berkshire Hathaway is of course no stranger to this market. Geico, BNSF, and Fruit of the Loom were all publicly traded at one point. Berkshire made them private by wholly acquiring them. Adding more privately held companies and holding fewer publicly traded equities isn't exactly uncharted waters.

More involved management

Warren Buffett scrutinizes every business -- both public and private -- before he invests in it. But once Berkshire owns it, Buffett refuses to meddle when he knows a proven manager is at the helm. Thus far, Greg Abel has followed the same line.

Once Buffett is no longer at the helm though, this could change.

Although he's said nothing particularly jaw dropping to this effect, he and those who know his management style have intimated that Abel may be more active in the day-to-day management of the company's 60-plus privately held outfits. Abel may also add some organizational hierarchy that Buffett didn't appear interested in putting in place. Only time will tell if Berkshire will be better or worse off with such changes.

Twice as big... literally

Finally, don't be surprised if Berkshire Hathaway doubles in size (in terms of market cap) over the next five years, subsequently doubling the stock's price.

That sounds like an enormous feat, but it wouldn't exactly be unthinkable. Such growth would translate into an average annualized gain of just under 15%, which isn't entirely out of line with Berkshire's usual market-beating growth pace.

Image source: Getty Images.

That being said, Berkshire also has something of an unfair advantage that will likely persist for at least the next few years. That's a shift away from an economic environment that favors growth stocks and toward one that favors the value holdings the conglomerate's been buying or building for some time now. Interest rates are stabilizing above the ultralow levels that lingered for years, for instance, while inflation-driven economic malaise does more harm to institution-focused technology and industrial stocks than it does to consumer goods companies.

There's also the not-so-small matter of valuation. Thanks to years of enormous gains from AI-related tech stocks that weren't matched by the performance of value stocks, Morningstar analyst David Sekera explains in the research outfit's third-quarter market outlook: "Not only are value stocks undervalued on an absolute basis, but they also remain near some of the most undervalued levels relative to the broad market over the past 15 years."

It's a dynamic that most definitely favors Berkshire's value-oriented portfolio.

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Bank of America is an advertising partner of Motley Fool Money. James Brumley has positions in Coca-Cola. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Skechers U.s.a. The Motley Fool has a disclosure policy.