Berkshire's "new king" takes his "first major action": $8.5 billion! Selling oil and gas, buying real estate

```

Berkshire Hathaway is defining its post-Buffett era investment style with real actions—trimming its position in Chevron at a high and instead making a bold $8.5 billion bet on the U.S. housing market.

According to a Wall Street Journal report on the 31st, Berkshire agreed to acquire U.S. homebuilder Taylor Morrison for $72.50 per share in an all-cash deal, a premium of about 24% over last Friday's closing price, valuing the equity at about $6.8 billion, and including debt, a total enterprise value of $8.5 billion. This is the first major acquisition completed by new CEO Greg Abel since he succeeded Buffett in January this year.

Meanwhile, Berkshire reduced its Chevron holdings by about $8 billion in the first quarter, cutting its stake in the company by about a third.

The combination of these two moves clearly outlines Abel's approach to asset allocation: cashing in on energy gains at a high, and shifting capital to the cyclically recovering housing sector. This strategic combination is expected to boost market confidence—Berkshire’s Class B shares have fallen 28% over the past year, with investors previously adopting a wait-and-see attitude toward the management transition.

Abel’s Debut: Entering the Housing Sector in Half a Year

Abel formally took over as CEO in January this year, about half a year ago. According to informed sources, Abel proactively reached out to Taylor Morrison CEO Sheryl Palmer this spring through the introduction of advisers and pushed negotiations toward a deal. The transaction is expected to close in the second half of this year, with Palmer remaining in her position after closing.

In a statement, Abel said that Taylor Morrison would be integrated with Berkshire’s Clayton Homes in the future, “enabling us to help more Americans realize the dream of homeownership.” This statement provides clear strategic logic for the acquisition—by consolidating residential-related assets, Berkshire aims to build a more complete housing industry chain.

At this year’s earlier Berkshire annual shareholders meeting, Abel publicly stated that the company had listed targeted acquisitions and emphasized that “market dislocations will provide us with opportunities for action.” This swift move is widely seen as Abel fulfilling his promise, demonstrating significant execution ability in mergers and acquisitions.

Betting on Housing Recovery: Industry Logic and Policy Background

Taylor Morrison is headquartered in Scottsdale, Arizona, with operations spanning 21 markets in 12 U.S. states, and posted $8.1 billion in revenue last year. In addition to traditional home development, the company operates rental communities under the Yardly brand and offers mortgage and other financial services to customers.

This acquisition comes against the backdrop of a moderate recovery in the U.S. homebuilding industry. According to the National Association of Home Builders (NAHB), new single-family housing starts in the U.S. will increase 1% to 940,000 units this year and are expected to grow another 5% to about 984,000 units next year.

Berkshire is no stranger to this sector. It previously held shares of Taylor Morrison competitors DR Horton, Lennar, and NVR, and owns Benjamin Moore (paint) and Johns Manville (roofing and insulation). The direct acquisition of Taylor Morrison further deepens its existing industry layout.

Additionally, the homebuilding sector is a primary focus for the Trump administration regarding housing affordability ahead of the midterm elections. Taylor Morrison has participated in discussions on a federal “rent-to-own” program aimed at helping more Americans enter the housing market and reducing inventory, providing some policy tailwinds for this deal.

Reducing Chevron: Cashing In on Energy Gains at Highs

Right around the time the Taylor Morrison acquisition was announced, Berkshire sold about $8 billion of Chevron stock in the first quarter, reducing its shareholding from about one-third to 4.2%.

According to Berkshire’s regulatory filing submitted Friday, the company remains Chevron’s fourth-largest shareholder after the sale. Bloomberg data shows the average selling price in this reduction was $182.59 per share.

Chevron’s share price hit an all-time high this March amid the U.S.-Israel conflict and surging oil prices, providing Berkshire with a prime window to realize profits. Looking back, Berkshire began building its Chevron position in 2020 when shares were around $65, and added at around $124 before and after the Russia-Ukraine conflict in 2022; this time, the average selling price was over $182, yielding substantial gains.

Cash Deployment: Where the $381.1 Billion Reserve Is Headed

The deeper significance of this transaction lies in renewed scrutiny over how Berkshire will deploy its massive cash reserves. At the end of Q1 this year, Berkshire held a record $381.1 billion in cash and short-term U.S. Treasuries.

In Buffett’s final years at the helm, Berkshire’s M&A activity clearly slowed. In October last year, Berkshire acquired Occidental Petroleum’s OxyChem unit for $9.7 billion, while Abel was still CEO-designate. In the first quarter of this year, the company also opened a new position with a $2.6 billion stake in Delta Air Lines.

In his first annual letter to shareholders this year, Abel reiterated his acquisition philosophy: “Major investment opportunities can be shared with us confidentially and will receive a quick response.” He also emphasized that a large cash reserve does not mean exiting investment; the company will maintain patience and discipline, seeking truly suitable opportunities.

The market generally believes that Abel’s completion of this large-scale deal within six months of taking office increases the likelihood that Berkshire will further utilize its cash reserves and accelerate its pace of acquisitions. In this transaction, Goldman Sachs and Moelis served as Taylor Morrison’s financial advisors, with Simpson Thacher providing legal counsel; Gibson Dunn acted as legal advisor to Berkshire.

Risk warning and disclaimerThe market has risks; investment needs caution. This article does not constitute personal investment advice, nor does it take into account the special investment goals, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article apply to their own circumstances. Investments made accordingly are at their own risk. ```