Chris Davis's 31.64% Stake Reduction in Berkshire Hathaway: A Value Investor's Strategic Shift or Warning Sign?

In the second quarter of 2025, Chris Davis, portfolio manager of Davis Financial Fund, executed a significant reduction in his stake in Berkshire Hathaway Inc (BRK.A), trimming it by 31.64%. This move, detailed in the fund's 13F filing, reduced the holding's weight in the portfolio by -2.27% and marked a pivotal shift in a strategy that has long emphasized durable, well-managed businesses. For long-term value investors, the question arises: Is this a calculated reallocation or a cautionary signal about Berkshire's future prospects?

Berkshire's Role in the Portfolio: A Legacy of Value

Berkshire Hathaway had long been a cornerstone of Davis Advisors' portfolio. At the start of 2025, the holding accounted for 3.6% of the fund's total assets, with an average buy price of $125,521.83. By Q2, the stock had surged to $611,375.00—a 387.1% gain—yet the fund chose to sell 1.07 million shares. This decision reflects a disciplined approach to capital allocation, where even high-performing assets are reassessed for alignment with long-term goals.

The reduction coincided with Berkshire's own strategic challenges. The company reported a 4% decline in operating earnings, driven by a $3.8 billion write-down on its Kraft Heinz stake and a 11% drop in insurance underwriting profits. Meanwhile, Warren Buffett's announced succession to Greg Abel triggered a 10% stock price drop, exacerbating concerns about leadership continuity. reveals a -9.23% return in Q2, underperforming the S&P 500's 2.51% gain.

Strategic Reallocation: Energy, Tech, and the New Frontiers

The reduction in Berkshire was part of a broader rebalancing. Davis Advisors added seven new stocks, including Coterra Energy (CTRA) and NVIDIA (NVDA), while increasing stakes in 43 others. The fund's largest new position—$237 million in CTRA—reflects a pivot toward energy, a sector grappling with regulatory shifts and demand volatility. Similarly, the $14 million investment in NVIDIA underscores a bet on AI-driven growth, a stark contrast to Berkshire's traditional value orientation.

The fund also exited five holdings, including Clear Secure Inc and Federal Realty Investment Trust, and reduced positions in 50 stocks, including Cigna Group (CI). These moves highlight a dynamic approach to risk management, prioritizing sectors with stronger growth trajectories and undervalued fundamentals. For instance, Tyson Foods (TSN), where the fund increased its stake by 91.4%, benefits from resilient consumer demand and a low valuation relative to its earnings growth.

Implications for Long-Term Value Investors

The reduction in Berkshire raises critical questions for value investors. Historically, Berkshire has been a proxy for stability and long-term compounding. However, its recent performance—coupled with Buffett's departure—has exposed vulnerabilities in its capital allocation and exposure to traditional industries. Davis's decision to pivot toward energy and tech suggests a recognition that value investing must adapt to evolving market dynamics.

For investors, this reallocation offers a blueprint for navigating a shifting landscape. Energy stocks like CTRA, despite sector-specific risks, offer attractive valuations and potential for earnings growth. Similarly, NVIDIA's dominance in AI positions it as a long-term winner in a technology-driven economy. could provide further insight into the sector's potential.

Conclusion: A Strategic Shift, Not a Warning

Chris Davis's stake reduction in Berkshire Hathaway is best viewed as a strategic recalibration rather than a warning sign. By exiting a high-performing but structurally challenged holding and reallocating to undervalued growth sectors, Davis Advisors demonstrates the flexibility required to thrive in a market increasingly dominated by AI and energy transitions. For long-term value investors, the key takeaway is clear: adaptability and sector diversification are now as critical as patience and discipline.

Investors should monitor the performance of Davis's new holdings, particularly in energy and tech, while keeping an eye on Berkshire's ability to navigate its leadership transition. In a world where even the most iconic value stocks face headwinds, the ability to rebalance and capitalize on emerging opportunities will define the next decade of value investing.