Warren Buffett once predicted that $Berkshire Hathaway(BRK.B)$ stock would rise when he eventually steps down.
So far, the opposite has happened.
BRK.B vs S&P 500 - past 3 months
Stock Price Movement.
Since Sat, 03 May 2025, when the “Oracle of Omaha” announced his plans to hand over the reins, the stock of his conglomerate has fallen more than -10%.
In fact, Berkshire Hathaway has underperformed the S&P 500 by about 24 percentage points. (see above)
Despite the corrections, the company is still worth more than $1 trillion in market capitalization.
Analysis.
The sell-off partially reflects the so-called Buffett premium, or “extra price” investors are willing to pay because of the billionaire’s unmatched record and exceptional capital allocation skills.
According to University of Maryland, Finance professor, David Kass (a longtime Berkshire shareholder):
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He was surprised at the magnitude of Berkshire’s underperformance.
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Especially since Buffett is not stepping down as CEO until 31 Dec 2025, with more than 180 calendar days to go (as of 04 Jul 2025).
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This relative decline may approach as much as -20% in the weeks ahead as some shareholders may become discouraged by Berkshire’s recent price performance.
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Lastly, he (further) added that, there might be additional decline in the shares, after Buffett departs at the end of 2025.
Buffett has shared that he decided to step down as CEO while remaining as chairman of the board after experiencing the physical effects of aging.
The investing legend expressed his confidence in his successor Greg Abel’s ability to carry on Berkshire’s culture, which Buffett built so meticulously.
Part of the reason for the stock’s recent poor performance, could be attributed to Berkshire’s Q1 2025 earnings decline.
Operating earnings, that include the conglomerate’s fully owned insurance and railroad businesses, fell -14% to $9.64 billion during the first three months of 2025.
According to Argus Research, Analyst, Kevin Heal:
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The first couple days after the announcement were definitely related to the “Buffett premium” .
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Also a lot of the ups and downs were caused by computer trading.
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However, subsequent declines were due largely to underlying assets, both public & private”.
At Keefe, Bruyette & Woods, Analyst, Meyer Shields believed:
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There is still a 5% - 10% Buffett premium in the stock, reflecting some investors’ confidence that Mr Buffett will still be there as chairman.
Recap.
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On 02 May 2025, BRK.B closed at $539.80 per share (its YTD peak).
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As of 03 Jul 2025, BRK.B has fallen by -10.15% to $485.00 per share.
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Based on Uni. of Maryladn professor Kass, the dip may enlarge to -20% in the weeks ahead due to market volatility.
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Finally, on the run up to 31 Dec 2025, there may yet be another dip as the reality of Mr Buffett no longer running Berkshire sets in.
With the possibility of more dips, is it worth the risk to hold onto BRK.B and hope the price recovers OR cash out while one is still ahead in profits ? Very tough decision !
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Do you think BRK.B fell because of quarterly earnings ?
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Do you think BRK.B fell because of Mr Buffett’s stepping down announcements and there will be more decline closer to 2025’s year end — on top of US market conditions / sentiments ?
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