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Since Warren Buffett announced his intention to retire at the end of 2025, Berkshire Hathaway’s (NYSE:BRK.B) shares have become noticeably cheaper, with both Class A and B shares falling by around 8% from their all-time highs, underperforming the broader S&P 500, which has risen over the same period.
This pullback may reflect investor anxiety about the post-Buffett era, despite his successor Greg Abel’s strong operational credentials. But there are likely factors at play.
A little intro on Berkshire
Berkshire Hathaway is a vast American conglomerate, famous for its unique structure and Buffett’s legendary value investing approach. The company’s operations span insurance (GEICO, Gen Re), railways (BNSF), utilities and energy (Berkshire Hathaway Energy), manufacturing (Precision Castparts, Duracell), and retail (Dairy Queen, See’s Candies).
In addition to wholly-owned businesses, Berkshire manages an enormous portfolio of publicly traded equities, with its largest holdings including Apple, American Express, Coca-Cola, Bank of America, and Chevron. These five stocks alone account for over 62% of its equity portfolio. For a period, Apple accounted for over half of this portfolio. Clearly, concentration risk wasn’t a huge concern for Buffett.
Cash-rich, but risk remains
Financially, Berkshire sits atop a colossal cash pile, with $333bn in cash and short-term investments, including over $300bn in US Treasury bills as of Q1 2025. This immense liquidity provides a buffer against market shocks and positions the company to seize opportunities during downturns.
However, the company’s first-quarter earnings fell short of expectations, and the recent leadership transition has led to investor caution and profit-taking after a strong multi-year rally.
Despite its diversification, Berkshire remains heavily US-focused, with the majority of its revenues and assets tied to the American economy. This domestic concentration means it’s particularly sensitive to US economic trends, such as inflation and growth.
According to the Federal Reserve’s model, a $10 increase in oil prices could push US inflation up by 0.4% and slow growth by a similar margin, underscoring the macroeconomic risks Berkshire faces as a predominantly American enterprise.
The bottom line
Berkshire Hathaway stands out for its remarkable long-term performance. The shares saw an average annual gain of 19.9% since 1965, far outpacing the S&P 500’s 10.4% over the same period. It has continued to outperform major indices since the start of the pandemic despite holding a limited number of technology giants — these are the stocks that have really taken the US indices higher.
Personally, I’m investing in Berkshire for the long run and, as such, I’m quite happy to take advantage of dips like this. I appreciate concern about Buffett’s retirement may dampen sentiment for some time, but I doubt the core investment proposition will change — this is about a diversified investment in the US economy. I believe investors should consider Berkshire Hathaway, especially as the stock pulls back.
