Berkshire Hathaway Inc. (NYSE:BRK) (NYSE:BRK) has posted its worst quarterly underperformance against the S&P 500 since 2020, lagging the benchmark by approximately 25 percentage points since Warren Buffett announced his retirement succession plan in May.
Historic Underperformance Amid Market Rally
Berkshire’s Class B shares have declined 14% since May 2, when the 94-year-old chairman reiterated his retirement timeline at the annual shareholder meeting. Over the same period, the S&P 500 has gained 11% including dividends, according to market commentary from The Kobeissi Letter.
The 25-point gap represents Berkshire’s largest underperformance since the second quarter of 2020 during the COVID-19 market crash. The current shortfall exceeds even the company’s relative performance during the 2008 financial crisis and the 2000 dot-com bubble.
Market Rotation Away from Value Sectors
The underperformance coincides with investor rotation out of value-heavy sectors including financials and industrials, which comprise significant portions of Berkshire’s portfolio. The S&P 500’s gains have been driven primarily by artificial intelligence euphoria and technology strength.
Berkshire’s portfolio includes major stakes in Apple Inc. (NASDAQ:AAPL), which represents 28% of its equity holdings, along with positions in American Express Co. (NYSE:AXP) and Coca-Cola Co. (NYSE:KO).
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Succession Planning Impact on Valuation Premium
Market analysts suggest the “Buffett Premium” – the valuation lift historically attributed to investor confidence in the Oracle of Omaha’s judgment – may be eroding as markets price in a post-Buffett era.
Greg Abel, vice chairman of Berkshire’s non-insurance businesses, is expected to assume the CEO role by year-end 2025. Buffett, who ranks as the world’s ninth-richest person with a $138 billion net worth, has maintained his $100,000 annual salary for over 40 years.
Technical Analysis and Market Context
Berkshire’s current underperformance occurs during a relatively stable market environment, contrasting with the crisis-driven conditions of previous major shortfalls.
The conglomerate’s diversified holdings span insurance, railroads, energy, and consumer brands, representing Buffett’s long-term value investing philosophy of buying “businesses you understand” with strong fundamentals and brand power.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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