Warren Buffett may have officially handed the chief executive role at Berkshire Hathaway to Greg Abel last December, but new evidence suggests he remains the one making major stock investment decisions at the conglomerate. Buffett, who built Berkshire into a sprawling collection of insurance, railroad, energy and manufacturing businesses over six decades, kept the chairman's seat in the transition, and how the division of labor would work in practice has been watched closely ever since.

The clearest example is Berkshire's $10 billion purchase of Alphabet shares in the second quarter. According to a Bloomberg News report, the deal came together after a weekend call from Goldman Sachs. Abel gave a quick sign-off on the transaction, but according to Barron's, it was Buffett who initiated the investment in the first place.

Buffett himself confirmed in a CNBC interview last month that he had personally “initiated” the Alphabet investment, which first appeared in Berkshire's portfolio in the third quarter of last year. A Buffett-driven technology purchase is itself notable: for most of his career he avoided the sector, describing it as outside his circle of competence, before Berkshire's Apple purchases, which began in 2016, grew into one of the conglomerate's biggest positions.

Who Is Actually Running the Portfolio?

Barron's analyst Andrew Bary argues that Abel — who rose through Berkshire's energy business and previously served as vice chairman for its non-insurance operations — has no formal portfolio management experience and is not the one making Berkshire's stock-picking decisions. Instead, Abel is focused on running Berkshire's operating companies, a group that includes the Geico insurance business and the BNSF railroad, and on finding new acquisitions for the company.

Abel has deployed capital in one area. He agreed to acquire homebuilder Taylor Morrison Home for $6.8 billion, though that deal closed only after the second quarter had ended.

The second-largest purchase of the quarter, Delta Air Lines, is believed to be the work of portfolio manager Ted Weschler rather than Abel. Weschler, a former hedge fund manager, has shared responsibility for part of Berkshire's equity portfolio with fellow investment officer Todd Combs since the early 2010s.

Berkshire's Alphabet stake grew by roughly $17 billion during the second quarter, pushing the stock into third place in the portfolio. As of June 30, the Alphabet position carried a market value of $37.77 billion, ahead of Coca-Cola at $32.51 billion. Since that date, the gap has narrowed sharply: Alphabet shares have dropped 3.5% while Coca-Cola has gained 12.1%, and as of Friday's close, Alphabet's lead over Coca-Cola stood at just $20 million. Berkshire's holdings become public each quarter through its 13F filings with the Securities and Exchange Commission, disclosures that are widely followed by outside investors, and the next set of filings will show whether Alphabet hangs on to its newly claimed rank.

Buffett's Market Warning and the CAPE Ratio

Separately, Buffett issued a broader warning about the state of the stock market in May. He said investors are currently in a “gambling mood,” treating markets like a casino, and that some valuations look “very silly.” Buffett has issued such cautions before, and he sat out the late-1990s technology boom rather than chase it.

That warning is being backed up by valuation data. The S&P 500's CAPE ratio, a valuation tool created by Nobel laureate Robert Shiller, hit 40.6 in July. The measure, formally the cyclically adjusted price-to-earnings ratio, compares the index's level with its average inflation-adjusted earnings over the prior ten years, a design intended to smooth out swings in the profit cycle. That is the highest reading since the dot-com crash in September 2000, and it places the index in rare territory: the S&P 500 has been this expensive only 3% of the time since the index launched in 1957.

Historically, a CAPE reading above 40 has not ended well for investors. The index has never posted a positive three-year return following such a reading, and the average three-year return in those cases was negative 30%. The last such episode, around the dot-com peak, preceded a downturn in which the S&P 500 lost roughly half its value between 2000 and 2002.

There are, however, counterpoints to the bearish reading. S&P 500 companies are forecast to report 50% earnings growth in the second quarter, which would be the strongest pace outside of post-recession recoveries, and some analysts argue that earnings of that strength could allow the index to grow into its current valuation. The CAPE ratio is also backward-looking by design and does not account for future earnings growth. Whether strong AI-driven earnings can keep the market elevated, however, remains to be seen.