Berkshire Hathaway Outperformed the S&P 500 Over a 60-Year Period Under Warren Buffett. Here's the Stock That Could Help Continue the Streak Under Greg Abel.

Berkshire Hathaway's remarkable 19.7% annualized return since 1965 contrasts sharply with the S&P 500's 10.5% during the same period. Under Warren Buffett's guidance, the conglomerate thrived by acquiring high-quality businesses at reasonable prices and holding them indefinitely, allowing compound returns to flourish. However, Greg Abel, the new CEO, faces the daunting challenge of replicating this stunning streak of success.

In Q3 2025, Berkshire Hathaway made a surprising move by increasing its stake in Alphabet (GOOGL +0.04%) (GOOG -0.02%). While Alphabet now represents just 3.4% of Berkshire's market cap, its meteoric 49% rise in the past year, coupled with a forward P/E ratio of 22.8, suggests significant growth potential. Buffett's unexpected pivot to tech, particularly Alphabet's AI-driven operations, hints at the company's future strengths.

However, Berkshire's massive scale and substantial cash reserves may hinder its ability to generate strong returns, as investors grow cautious about the impact of increased capital expenditures on Alphabet's free cash flow. As the company pours billions into AI, it remains uncertain whether the AI boom will prove fruitful. While Buffett's legacy is undeniable, Abel will need to navigate a landscape filled with both opportunity and risk for Berkshire Hathaway to sustain its outperformance streak.