Warren Buffett's Berkshire Hathaway: Is the Premium Over?

Berkshire Hathaway's stock performance has been disappointing despite the S&P 500 reaching new highs. The company's CEO, Warren Buffett, announced he will step down at the end of 2022. Berkshire Hathaway's P/B ratio is 1.5, and P/E ratio is 22.9x, which is stretched. The company's cash hoard is nearly its largest ever, at $344 billion. Investors are questioning whether the Buffett premium is over and whether Berkshire Hathaway is still a good value.

Title: Berkshire Hathaway's Recent Investments: A Shift in Strategy or a Signal of Distress?

Berkshire Hathaway, the multinational conglomerate led by Warren Buffett, has recently made significant changes to its investment portfolio. Despite the S&P 500 reaching new highs, Berkshire Hathaway's stock performance has been disappointing, raising questions about the future of the company and the Buffett premium. As Buffett steps down at the end of 2022, investors are questioning whether Berkshire Hathaway remains a good value.

Recent Investments and Their Impact

In the second quarter of 2025, Berkshire Hathaway made several notable moves. The company invested $1.6 billion in UnitedHealth Group, a move that sent the stock up in after-hours trading [1]. This investment came amid a series of challenges for UnitedHealth, including a 46% stock price decline, federal investigations into Medicare billing, and a massive cyberattack. Despite these challenges, Buffett's bet on UnitedHealth underscores his long-standing commitment to value investing, prioritizing durable cash flows and pricing power over speculative tech [3].

Berkshire also trimmed its holdings in Apple and Bank of America and completely divested from T-Mobile US. The company initiated new positions in steelmaker Nucor and homebuilder Lennar, reflecting a strategic shift toward sectors with inelastic demand and predictable cash flows [2]. These moves suggest a broader reallocation of the portfolio, with the company reducing its exposure to tech and increasing its presence in sectors that are less sensitive to macroeconomic volatility.

The Buffett Premium and Berkshire's Valuation

Berkshire Hathaway's P/B ratio of 1.5 and P/E ratio of 22.9x are stretched, raising concerns about the company's valuation. Despite a cash hoard of nearly $344 billion, investors are questioning whether the Buffett premium is over and whether Berkshire Hathaway is still a good value. The company's recent underperformance has led some to wonder if the Buffett effect is waning.

What Happens Next?

Buffett will step down as Berkshire's CEO at the end of this year, with Greg Abel taking over the role. However, Buffett will remain chairman of the company's board of directors. This transition will be closely watched by investors, who are eager to see how the new leadership will shape Berkshire's future.

Conclusion

Berkshire Hathaway's recent investment moves reflect a strategic shift toward sectors with inelastic demand and predictable cash flows. While the company's valuation remains stretched, these investments could signal a calculated bet on the long-term resilience of these sectors. As Buffett steps down and a new era begins at Berkshire Hathaway, investors will be watching closely to see how the company adapts to changing market conditions and whether the Buffett premium remains intact.

References

[1] https://www.newsweek.com/warren-buffett-mystery-stock-revealed-sec-filing-2114195
[2] https://economictimes.indiatimes.com/markets/stocks/news/warren-buffetts-berkshire-takes-1-6-billion-unitedhealth-stake-trims-apple-exits-t-mobile-in-q2/articleshow/123320584.cms?from=mdr
[3] https://www.ainvest.com/news/warren-buffett-berkshire-hathaway-invests-unitedhealth-group-strategic-move-long-term-implications-2508/