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Shares of Warren Buffett’s Berkshire Hathaway have underperformed the wider market by one of the biggest margins in decades, as his retirement as chief executive nears and some investors head for the exits.
Berkshire’s class A shares have tumbled 14 per cent since May 2, the last trading day before 94-year-old Buffett said he would hand control of Berkshire to top executive Greg Abel.
Berkshire’s slide contrasts with a rally in the S&P 500 of 11 per cent, including dividends.
Buffett is in the home stretch of a six-decade tour de force atop Berkshire, transforming a struggling textile mill into a financial conglomerate spanning sectors from insurance to natural gas pipelines. His returns, built on a buy-and-hold, value-driven strategy since he took over Berkshire in 1965, have outperformed the benchmark S&P 500 by more than 5mn percentage points.
That has created what CFRA analyst Cathy Seifert described as the “Buffett premium” on Berkshire shares — but one that may not immediately pass to his successor.
The lag to the S&P 500 is among the largest Berkshire has suffered over any three-month period stretching back to 1990, according to an analysis by the Financial Times. The company only trailed the index more on a three-month basis early in the pandemic, when investors slashed their equity positions, with insurers and financial services companies — core Berkshire holdings — particularly hard hit.
It is not yet known who has been selling class A shares, Berkshire’s original high-vote stock, which in May changed hands at a record $812,855 apiece. The A shares have long been held by families who invested with Buffett earlier in his career, and passed down through generations. Quarterly reports from large institutional investors and hedge funds will not be disclosed until later this month.
The selling over the past three months has materialised even as Berkshire continued to report healthy operating results across its businesses, with the BNSF railroad, its handful of utilities and manufacturing, service and retailing divisions all reporting profit growth in the second quarter.
Operating profits across the company were hit by currency moves, but excluding those shifts, Berkshire generated an 8 per cent rise in earnings from a year earlier.
Berkshire did not respond to a request for comment.
Buffett’s investment horizon stretches over decades, and Berkshire shareholders said a three-month window was not a fair measure of the company’s performance.
Berkshire shares had also surged in the months leading up to this year’s annual meeting in May, rising 18.9 per cent. Investors bought as markets whipsawed on US President Donald Trump’s tariff war, turning to Berkshire as a haven.
“As the worries about tariffs started to build . . . there were people rotating into the safety of Berkshire,” said Bill Stone, the chief investment officer of Berkshire investor Glenview Trust.
The Monday following Buffett’s May announcement, shares fell nearly 5 per cent.
Stone, who likened Berkshire’s $344bn cash and Treasury investment pile to Fort Knox, said investors have jumped back into fast-growing technology stocks in the ensuing months, as investor fears over a recession moderated.
“What is really moving in this market is technology, and we know that’s not really his thing,” he added.
The rally in Berkshire shares earlier this year also pushed its valuation to heights it has rarely achieved since the global financial crisis. Berkshire’s price-to-book ratio, a measure of how its market capitalisation compares to the value of its net assets, climbed to almost 1.8 times, its highest level since October 2008.
Buffett, who oversees the company’s share repurchase programme, stopped buying back Berkshire shares in May 2024. He repurchases stock when he “believes that the repurchase price is below Berkshire’s intrinsic value”, according to company filings.
“The stock was overvalued,” said Christopher Bloomstran, the president of Berkshire shareholder Semper Augustus Investments. Bloomstran added that he believed the recent pullback might entice Buffett to start buying again soon.
Buffett has also been taking chips off the table. Last year he sold a large portion of the company’s investment in iPhone maker Apple, and Berkshire has now been a net seller of stocks for 11 consecutive quarters, pushing its cash levels to 30 per cent of total assets at the end of June.
In other periods of market exuberance, notably the dotcom bubble in 1999, Buffett sat on the sidelines. While that generated opprobrium from critics at the time, with Berkshire shares lagging the technology-heavy Nasdaq Composite, the ensuing correction underscored his investment bona fides.
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