Berkshire's New CEO Omits BAC and CVX: A Value Investor's Look at the Portfolio's Moat and Margin of Safety

Greg Abel has laid out the first clear map for Berkshire's investment future in his inaugural shareholder letter. His blueprint centers on a disciplined focus, designating four companies as "core holdings": Apple, American Express, Coca-Cola, and Moody's. This is more than a list; it's a signal of intent. Abel stated these are positions in which Berkshire has "full understanding, high regard for their management teams, and expectations of sustained compound growth over decades." The implication is clear: these will be held long-term, with operations regarding them "limited." Collectively, these four stocks account for more than half of the approximately $300 billion equity portfolio, forming its bedrock.

The significance of these core holdings is underscored by their history and cost basis-a classic value investor's moat. Coca-Cola and American Express have been held for over four decades, while Moody's and Apple have been in the portfolio for more than 20 years. For a long time, these have been regarded as "permanent holdings," a label reinforced by their extremely low acquisition costs. Berkshire's average purchase price for Coca-Cola was around $3 per share, and for Apple, roughly $27. These positions now trade at prices that are multiples of those costs, providing a wide margin of safety in terms of capital appreciation already achieved.

Yet the blueprint is defined as much by what it omits as by what it includes. Notably absent from the core list are Bank of America and Chevron, both of which were among the top five holdings just a quarter ago. This omission is a strategic signal. It suggests a potential pruning for a stricter margin of safety, moving away from positions that may not meet the new, higher bar for "full understanding" or sustained compound growth. Over the past 18 months, Berkshire has already reduced its Bank of America stake by about half, and the Chevron position remains sizable. Abel's letter leaves these as "meaningful positions" in a "small number of other companies," where capital allocation will be "more dynamic." This language frames them as candidates for future core status, but not as locked-in pillars of the portfolio.

The contrast is telling. The core holdings represent a fortress of known, compounding businesses with a proven track record and a fortress of low cost. The omission of BAC and CVX, even as they remain in the portfolio, signals a new era of selectivity. It is a move toward a narrower, more concentrated portfolio of "core" businesses, where the margin of safety is derived not just from price, but from a deep, enduring understanding of the business itself.

Evaluating the Omitted Holdings: Moats, Intrinsic Value, and Owner Earnings

The strategic pruning signaled by Greg Abel's letter is not a new phenomenon. It is a continuation of a phase that began under Warren Buffett's final quarter as CEO, where Berkshire was a net seller across key holdings. This context is crucial for evaluating the omitted companies. For a value investor, the question is not just about price, but about the durability of the economic moat and the realization of intrinsic value.

Bank of America presents a case of a wide moat facing sector headwinds. The bank's market cap of $383.74 billion reflects its entrenched position, but its year-to-date decline of 7.76% signals pressure. This drop, occurring against a backdrop of rising interest rates and potential loan loss provisions, tests the resilience of its franchise. The value investor's lens focuses on whether this pressure is temporary or structural, and whether the bank's historical profitability can be sustained. The omission from the core list may indicate a wait-and-see posture on this question, as the margin of safety appears compressed.

Chevron, by contrast, is a story of value realization. Berkshire's position is a classic example of a disciplined sell. The investment has netted a 42% gain from a cost basis of $15.6 billion, with the current stake valued at $22.1 billion. This is not a holding being abandoned due to deteriorating fundamentals, but one where the capital has been deployed to its highest and best use. The pattern of net selling, even as the company increased its position in Q4 2025, underscores a focus on locking in gains from a favorable entry point. It is a textbook application of the principle to "sell high."

Together, these holdings illustrate the dual drivers of portfolio pruning. One is the potential erosion of a moat, as with BAC. The other is the successful harvesting of value, as with CVX. The significant Q4 sales of Apple, Bank of America, and Amazon under Buffett's final quarter set the stage for Abel's more selective approach. The new CEO is now applying a stricter filter to the remaining "meaningful positions," asking not just if a business is good, but if it meets the new, higher bar for "full understanding" and sustained compound growth. The pruning continues, but its rationale is now more explicitly tied to the core tenets of value investing: durable competitive advantages and the prudent realization of capital.

Financial Impact and Capital Allocation: From Write-Downs to Core Deployment

The financial backdrop for this new era is one of transition. Berkshire reported nearly $67 billion in profit for 2025, a figure down nearly 25% from the prior year. The primary driver was a drop in its insurance underwriting, a key engine of the conglomerate's business. This decline in core earnings may influence the capital available for new investments, making the disciplined deployment of cash even more critical. It sets a context where every dollar of capital must be allocated with the highest regard for both safety and long-term return.

Within this financial picture, the portfolio changes themselves carry a cost. The company took a $4.5 billion write-down on the value of its stakes in Kraft Heinz and Occidental Petroleum. This is a tangible reminder of volatility and the importance of a margin of safety. For a value investor, such write-downs are not just accounting entries; they are a lesson in the perils of overpaying or misjudging a business cycle. They underscore the discipline required to hold positions only when the intrinsic value is clearly above the price paid.

The capital freed from selling Bank of America and Chevron is the most significant financial consequence. The Q4 sales of Apple, Bank of America, and Amazon, as noted in the evidence, were heavy and concentrated. While the exact allocation of the proceeds is not yet clear, the strategic blueprint points toward a likely path. The capital is almost certainly being redeployed to bolster the newly designated core holdings or to pursue other opportunities that meet the new, higher bar for "full understanding" and sustained compound growth. The fact that these sales were executed under the final quarter of Buffett's tenure, and now form the foundation of Abel's new era, represents a key test of the blueprint. The market will watch to see if the cash is used to deepen the fortress of core holdings or if it flows into new ventures that will eventually earn a place at the table. For now, the capital remains a powerful tool, its deployment the next chapter in Berkshire's story.

Catalysts, Risks, and What to Watch: Validating the New Moat

The new investment blueprint is now in place, but its durability will be tested by future actions and results. For a value investor, the next phase is one of validation. The key catalysts are clear: watch for the capital to be deployed, the core holdings to prove their mettle, and the CEO's stewardship to align with the legacy.

First, monitor the portfolio's evolution through future 13F filings. The strategic shift is already underway, with Berkshire having sold 75% of its Apple shares since the summer of 2023 and 75% of its Bank of America shares since mid-2024. The critical question is whether these reductions are complete or if further pruning is planned. A continued reduction in the Chevron position, which remains a major holding, would confirm the new CEO's commitment to a narrower, more selective portfolio. Conversely, a stabilization or increase in these stakes would signal a more gradual approach. The filings will show if the capital is being redeployed into the new core or if the "meaningful positions" are being held for a longer watch.

Second, the performance of the designated core holdings is the ultimate test of the blueprint. The most significant action has already been taken with Apple, where the stake has been slashed by over three-quarters. The market will now judge the CEO's commitment to long-term compounding by how these remaining core businesses perform. Their ability to generate consistent owner earnings and compound intrinsic value over decades is the very definition of a wide moat. Any divergence from this path would challenge the rationale for their core status. The other three-American Express, Coca-Cola, and Moody's-must continue to demonstrate the same resilience and growth trajectory that earned them this designation.

The primary risk, however, is one of philosophy. Greg Abel has pledged to maintain Berkshire's culture and integrity, referencing his letter and the continued involvement of Warren Buffett as chairman and the largest shareholder. Yet, the new CEO's approach to capital allocation and the explicit designation of a core list represent a tangible departure from Buffett's more open-ended style. The risk is that the new stewardship diverges too much from the proven philosophy that built the empire. For now, the evidence suggests continuity, but the test is in the long-term results. The market will watch to see if the new moat is as durable as the old one.