In today's stock market, department stores aren't exactly what comes to mind when asked to discuss the hottest stocks. That slot is typically reserved for artificial intelligence (AI), which is proving to be massively disruptive to society. New Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) CEO Greg Abel, for instance, has not shied away from this trend. Under Abel's leadership, Berkshire has spent tens of billions of dollars over the past year buying stock in AI giant Alphabet.

But in the second quarter, Berkshire also spent time purchasing several other stocks, including a legacy department store with little connection to AI. Does Abel know something that Wall Street doesn't?

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'A Bold New Chapter'

In the second quarter, Berkshire more than doubled its position in Macy's (NYSE: M). The position remains small, valued at roughly $173 million at the end of the second quarter and accounting for 0.1% of Berkshire's massive portfolio.

It's easy to see why investors might be glossing over Macy's, but the company has been focused on a turnaround strategy called "A Bold New Chapter," which began in 2024 and has three major parts.

The first involved revamping the company's footprint, including closing 150 locations that were no longer productive and investing in roughly 350 stronger-performing stores to make them even more appealing to customers.

The second part of the strategy involved focusing more on Macy's luxury brands, such as Bloomingdale's and Bluemercury, which have been strong performers. This means adding new stores under these brands and remodeling some existing ones.

The final part of the turnaround includes streamlining back-end operations, such as the company's supply chain asset portfolio, and creating a scalable technology platform.

Macy's efforts have paid off. In the first quarter of its fiscal year 2026, the company posted its best comparable sales growth in four years. Reimagined store locations saw 2.4% year-over-year growth and have now posted positive annual growth in eight of the last nine quarters.

Bloomingdale's reported 10.2% year-over-year growth, the highest first-quarter growth in Macy's 154-year history. Macy's has also developed an Ask Macy's AI-powered assistant to drive higher conversion online. The market seems to like the results, with the stock up roughly 78% in the past year.