Warren Buffett has held the title of being the world’s richest man and also the title of being the world’s greatest investor. Whether you like Buffett’s philosophy and business style or not, it is undeniable that he built a financial empire by sticking with a few core strategies at Berkshire Hathaway Inc. (NYSE: BRK-B). And we now know Buffett’s streak of running the show is ending after more than six decades. Buffett is 94-years old and has started to sound like it.
When Buffett announced his retirement as the CEO of Berkshire Hathaway at the annual shareholder meeting on May 3, 2025, he set an exit date for the end of 2025. Berkshire’s investors also now have the “successor gap” answered as Greg Abel is set to takeover as CEO. Every investor also assumed that there was a “Buffett Premium” in Berkshire Hathaway’s shares — how much more Berkshire Hathaway was worth with Buffett as the face-man for the company than with him not in the picture.
Oggonomics had always assumed that there was probably a 10% value bump in that “Buffett Premium.” Well, Berkshire Hathaway’s market cap fell from just over $1.14 trillion down to $1.04 trillion over the week’s since his announcement of Greg Abel as successor.
The reality is that the market will now never know what would have been the case had Buffett passed away or had a medical event that resulted in an immediate and total exit. And Buffett’s current plan to remain Chairman will likely keep at least some of that “premium” in the shares.
TIME & DATE… NOT SO PRETTY
Some of the premium is quite trackable by dates, and by contrast against the broader market. There was an immediate impact in Buffett’s departure. Then there was a continued impact by the end of May, and again by the end of June, and a continued drip lower for much of July.
What makes this contrast much starker is that this was a period when the stock market was recovering and also hitting all-time highs as the tariff woes and the inflationary scares around the new policies have been abating and coming to more reasonable outcomes than the initial fears had been warning about. Here are some of those key dates…
May 2, 2025 — Berkshire closed at $539.80, an all-time high and a gain of 19% YTD at that time. The S&P 500 had recovered from the April lows, but the S&P 500 was down 3% YTD as of May 2.
May 5, 2025 — The first-day reaction to the Buffett exit announcement took Berkshire Hathaway’s stock down 5.1% to $512.15. The S&P 500 closed down 0.58% on that same day, so the pressure on Berkshire Hathaway was 9-fold and on about 4-times Berkshire’s average daily trading volume.
May 30, 2025 — The performance was even worse over the course of May. Berkshire Hathaway’s close of $503.96 at the end of May had Berkshire’s shares down 6.64% at $503.96. The S&P 500’s close at the end of May versus the May 2 peak date (apples-to-apples) was up 4% over the same 28-day period.
June 30, 2025 — Berkshire Hathaway’s close of $485.77 on May 30 was 3.6% from the last trading day in May, but it was down a sharp 10% from that key May 2 date ahead of the Buffett departure news. The S&P 500 rose another 5.1% in the month of June from the last trading day in May — and it was up a sharp 9.3% from that key May 2 date ahead of the Buffett departure news.
July 25, 2025 — The last Friday of July showed that Berkshire Hathaway’s stock closed at $484.07, also down about 10% from the May 2 absolute high, but the S&P 500’s gain of 3.1% on a month-to-date gain was up 8.4% from May 30 and up a sharp 12.7% from that key May 2 date ahead of the Buffett departure news. And as of July 30, Berkshire Hathaway’s gain was just 6.8% YTD while the S&P 500 was up 8.7% YTD (and at an all-time high).
THERE ARE EXCEPTIONS (OR EXCUSES)
There are many explanations or excuses that investors could make for highlighting the S&P 500 over Berkshire Hathaway or vice-versa. Here are some of those reasons:
- The S&P 500 was more sensitive to broader economic pressures (including tariffs) than Berkshire Hathaway was, with more downside in hard times and more upside in recovery and expansion.
- Buffett and his asset managers had been aggressively cutting exposure to major stock market gains in Apple, BofA and some other stock holdings ahead of and into the market volatility from February to April — so Berkshire Hathaway also missed out on the broad recovery from April thru July.
- Buffett will still be around for fatherly advice, with the Chairman title, so he is not entirely out for the time being.
- Buffett’s vast holdings of Berkshire Hathaway’s stock are now not in limbo as much as they might be if had he died or suddenly become incapacitated.
- Berkshire Hathaway’s top privately held subsidiaries under its namesake for insurance, as well as BNSF (rail), GEICO (auto insurance), General Re and its vast energy/power holdings (MidAmerican, NV Energy, BHE and others) make the company as a whole more defensive during period of economic uncertainty and market turbulence.
- The recovery and gains of the S&P 500 are also dominated the gains in the largest tech stocks (NVIDIA, Microsoft, Apple, Amazon, Meta are 27% of the entire S&P 500).
AND…
While Buffett’s departure news was the main issue since May, investors also need to consider that Berkshire Hathaway’s profits were under market expectations — and Wall Street had seen several quarters of the conglomerate beating earnings expectations. The profits underperformed in Primary and Reinsurance, Rail, Manufacturing, Utilities and in Energy. GEICO and Services outperformed expectations, and its Retailing did well also, but not enough to overcome the larger areas of underperformance.
KBW analyst Meyer Shields kas a Market Perform rating and lowered his earnings expectations for both 2025 and 2026 on the heels of the report. His new valuations have Berkshire Hathaway valued at 25-times 2025 earnings and about 1.7-times its current book value, with a $735,000 price target for the (much) larger-priced A-shares.
UBS has a Buy rating and a much more aggressive $909,000 price target for the A-shares.
Anyhow, it’s possible to go on and on about the “Buffett Premium” that was in Berkshire Hathaway shares. At least now we know what that was under the current circumstances at the current time — it looks to be about $100 billion, give or take…
