Warren Buffett's Berkshire Hathaway Lags Market By 25% Since Exit Announcement

Warren Buffett's Berkshire Hathaway has lagged the S&P 500 by 25% since his retirement succession announcement in May. The underperformance is the largest since 2020 and coincides with investor rotation out of value-heavy sectors. Berkshire's diversified holdings span insurance, railroads, energy, and consumer brands, reflecting Buffett's value investing philosophy. The "Buffett Premium" may be eroding as markets price in a post-Buffett era.

Warren Buffett's Berkshire Hathaway has experienced significant underperformance since his retirement succession announcement in May. The company's Class A shares have lagged the S&P 500 by 25% since the announcement, marking the largest gap since 2020 [1]. This underperformance coincides with a broader investor rotation out of value-heavy sectors, highlighting the challenges faced by Berkshire Hathaway in a market dominated by growth stocks.

Berkshire's diversified holdings, spanning insurance, railroads, energy, and consumer brands, reflect Buffett's traditional value investing philosophy. However, the company's massive scale and cash position have created unique constraints, limiting investment options and contributing to persistent underperformance [1]. The sheer size of Berkshire's balance sheet, with $347.7 billion in cash, earns modest returns while growth stocks deliver exponential gains.

The succession from Buffett to Greg Abel represents the end of an era for American investing. While the immediate market reaction was severe, investors should consider whether current valuations present long-term opportunities for those willing to accept the risks of a post-Buffett Berkshire Hathaway. The company's value-oriented approach faces headwinds in a growth-dominated market, contributing to ongoing Berkshire underperformance [1].

Historical context shows mixed outcomes from legendary CEO transitions. While some companies, like Apple and Microsoft, have successfully navigated leadership changes, others, such as General Electric and IBM, have struggled. Berkshire's unique vulnerability lies in its massive scale and the difficulty of finding attractive acquisition targets that can meaningfully impact returns [1].

Berkshire's insurance operations, a significant part of its portfolio, also face mounting challenges. GEICO, despite reporting a turnaround in 2024, faces competitive pressures, and reinsurance operations are strained by social inflation and climate losses. The company's underwriting profits fell 11% year-over-year in Q2 2025, despite generating valuable float [1].

The "Buffett Premium" on Berkshire shares, reflecting the legendary investor's market acumen, may be eroding as markets price in a post-Buffett era. The lag to the S&P 500 is among the largest Berkshire has suffered over any three-month period stretching back to 1990 [2].

In conclusion, Berkshire Hathaway's underperformance since Buffett's retirement announcement reflects both immediate succession concerns and longer-term structural challenges facing value investing in today's market environment. As Buffett steps down, investors must evaluate whether Berkshire's value-oriented approach can adapt to a growth-dominated market.

References:
[1] https://get.ycharts.com/resources/blog/berkshire-underperformance-2025/
[2] https://www.irishtimes.com/business/2025/08/06/berkshire-hathaway-shares-tumble-as-warren-buffett-prepares-to-step-down/