Berkshire Hathaway shares plummet in response to announcement of Warren Buffett's retirement
Berkshire Hathaway, the financial conglomerate led by Warren Buffett for over six decades, has seen a shift in its performance relative to the S&P 500 since Greg Abel took over as CEO. Over the past few years, the S&P 500 has outperformed Berkshire, particularly in the first half of 2025.
Despite this recent underperformance, it's important to note that Berkshire has maintained a strong decade-long performance, often outpacing gold and being close to or ahead of the S&P 500 until more recently. This trend is influenced by broader market dynamics, including sector rotations and stock market crashes.
Berkshire’s portfolio, heavily weighted in traditional industries and insurance businesses, has faced headwinds compared to the tech-heavy and growth-oriented S&P 500 index. For instance, Berkshire's stock dipped during the strong growth periods of the S&P 500 in 2025, while the index briefly moved ahead or matched Berkshire over this period.
The underperformance over the recent timeframe is not solely due to changes in management strategy or execution deficits. Instead, it largely reflects market conditions and sector performance dynamics.
Buffett's Decisions and Market Movements
In 2020, Buffett sold a significant portion of the company's investment in Apple, the iPhone maker. This decision, coupled with the market conditions, may have contributed to the recent underperformance of Berkshire Hathaway.
Christopher Bloomstran, the president of Berkshire shareholder Semper Augustus Investments, believes that the recent pullback might entice Buffett to start buying again soon. In the past, Buffett has chosen to sit on the sidelines during periods of market exuberance, as he did during the dotcom bubble in 1999.
Operational Results and Cash Position
Despite the market turbulence, Berkshire Hathaway reported healthy operating results across its businesses in the second quarter of 2021. However, the ensuing correction in the dotcom bubble underscored Buffett's investment bona fides.
Berkshire has been a net seller of stocks for 11 consecutive quarters, pushing its cash levels to 30% of total assets at the end of June. This move, coupled with Buffett's decision to stop buying back Berkshire shares in May 2024, citing overvaluation, indicates a cautious approach to investing.
However, Berkshire has not responded to a request for comment regarding its current investment strategies.
Transition and Future Leadership
Greg Abel, the top executive who will take control of Berkshire Hathaway as Warren Buffett retires as chief executive, has not made any significant management changes that could directly impact the company's performance. The selling of Berkshire Hathaway's class A shares, without knowledge of who is selling, also does not provide clear evidence of changes in management strategy or execution deficits.
In conclusion, the recent underperformance of Berkshire Hathaway relative to the S&P 500 since Greg Abel became CEO largely reflects market conditions and sector performance dynamics rather than clear evidence of changes in management strategy or execution deficits.
- The sale of a substantial portion of Berkshire Hathaway's investment in Apple by Warren Buffett in 2020, along with market conditions, might have played a role in the recent underperformance of Berkshire Hathaway.
- Christopher Bloomstran, the president of Berkshire shareholder Semper Augustus Investments, suggests that the recent pullback could prompt Buffett to resume buying soon, as he had done during market exuberance in the past.
- Berkshire Hathaway's cautious approach to investing is evident in its net selling of stocks for 11 consecutive quarters, thereby pushing its cash levels to 30% of total assets at the end of June.
- Despite Greg Abel's transition as CEO, there has been no evidence of significant management changes that could directly impact Berkshire Hathaway's performance, nor has there been clear evidence of changes in management strategy or execution deficits from the selling of Berkshire Hathaway's class A shares.
