By Andrew Bary
Berkshire Hathaway stock has gone from expensive to cheap over the past year.
At its current price, not a lot has to go right for this trillion-dollar conglomerate to generate market-beating returns -- even without Warren Buffett at the helm.
Berkshire has a capable manager in Greg Abel as CEO, earnings power of about $50 billion annually, a stock repurchase program in place that might total $50 billion this year, and $373 billion in cash on its balance sheet to make new investments.
The stock is in the midst of one of its worst periods of underperformance relative to the S&P 500 index since Buffett took control of Berkshire in 1965.
The Class A shares are down 6% this year to $706,000, while the Class B shares are off a similar percentage to $470. The S&P 500 has returned about 4% so far in 2026.
The gap is more glaring over the past year, with Berkshire down about 13% since it peaked on May 2, 2025. That was the final trading day before the Berkshire annual meeting when Buffett surprised everybody by announcing he would step down as CEO at year-end in favor of longtime Berkshire executive Greg Abel while remaining chairman. The S&P 500 has returned 26% since then, resulting in a gap of almost 40 percentage points over Berkshire.
The current price offers a good entry point for investors and potentially allows the company to repurchase a lot of stock.
The stock's weakness appears to reflect a few factors: the disappearance of any Buffett premium, a wait-and-see attitude toward Abel, lackluster revenue trends, and doubts about whether Abel will be able to deploy much of Berkshire's cash.
These are legitimate issues, but they appear to be reflected -- and then some -- in Berkshire's stock price.
Investor Christopher Davis of Hudson Value Partners (no relation to the Berkshire board member with the same name) says investors this year are gravitating to so-called HALO stocks (Heavy Assets, Low Obsolescence) like Caterpillar amid concerns about disruptions caused by artificial intelligence, but are ignoring one of the best plays -- Berkshire.
"Berkshire is the ultimate HALO company, given the durability and inflation protection of the insurance business and the very-hard-to-replicate industrial operating businesses," he says. Berkshire owns Burlington Northern Santa Fe, one of the two largest railroads in North America; Berkshire Hathaway Energy, one of the country's biggest electric utilities; and a slew of industrial businesses including Lubrizol (chemicals) and Precision Castparts (aircraft parts). Davis calls the stock a "coiled spring" at the current price.
UBS analyst Brian Meredith also is a fan of the stock, telling Barron's it is attractively priced relative to intrinsic value and also defensive given its diversified earnings power and huge cash position.
"The business fundamentals are fine but not phenomenal," he says. There's room, he says, for Abel to improve performance at key divisions like BNSF and Berkshire Hathaway Energy, which both lag peers in key profit measures. Meredith has a Buy rating and a price target of $871,000 on the A shares, nearly 25% above current levels.
Berkshire resumed its share-repurchase program on March 4 after a nearly two-year hiatus and bought over $200 million of stock that day, Barron's calculates, based on information in the Berkshire proxy. With the shares down 3% since then, the company may have continued or accelerated that program.
The company will detail its first-quarter share repurchases and probably those in the first three weeks of April in its next 10-Q report. That filing and Berkshire's first-quarter earnings releases are due on May 2, the date of the annual meeting.
The stock now trades for less than 1.4 times our estimate of the company's first-quarter book value of about $505,000 per class A share -- against 1.8 times a year ago, which was near the highs of the past 25 years. The current price/book ratio is below the average of the past three years.
Book value, or shareholder equity, has been a good yardstick for Berkshire stock during Buffett's tenure. Buffett emphasizes intrinsic value -- or the value of Berkshire's businesses rather than their carrying value on the company's balance sheet since most are worth way more than their historic carrying value.
Buffett doesn't reveal his intrinsic value estimate, but some analysts and investors share theirs. Longtime Berkshire watcher Chris Bloomstran of Semper Augustus Investments in St. Louis does an annual estimate, and his latest earlier this year was $855,000 per share -- 21% above the current stock price. UBS' Meredith estimates it at $758,000, 7% above.
Bloomstran sees Berkshire stock as capable of generating around 10% annual returns over the next decade, driven by growth in book value.
Berkshire isn't as cheap when it's valued at 23 times projected 2026 earnings -- as the analyst consensus has it -- but the company is carrying a lot of low-yielding cash and investments on its balance sheet. Adjust for those factors and the effective price/earnings ratio is lower, roughly in the high teens.
There's probably room for improvement at Berkshire on the operational and investment sides.
"Operating revenues were flat at Berkshire last year," says Cathy Seifert, an analyst at CFRA. "I'd like to see Greg Abel confront the issues and outline a plan for profit and revenue improvement."
Abel may also need to address how he plans to deploy Berkshire's huge cash position. Most of that can be invested, but he may need to set aside a chunk to backstop Berkshire's huge property and casualty insurance operations.
In a mild surprise, Abel is asserting control over virtually all of Berkshire's $300 billion equity portfolio. Ted Weschler, a longtime Berkshire manager, is getting authority over 6% of it, up from 5% when Buffett was CEO.
Buffett had originally envisioned Weschler and Todd Combs running the entire equity portfolio under the oversight of Buffett's successor as CEO. Combs left Berkshire in December for an investment job at JPMorgan Chase.
Abel, however, has no formal experience as a portfolio manager and is fully engaged on the operations side. He ought to consider hiring more investment talent and give Weschler more authority.
Berkshire's 13-member board of directors -- including two of Buffett's three children -- has long been deferential to Buffett and could use stronger independent members now that Buffett is no longer CEO. One great addition would be Apple CEO Tim Cook, who is set to leave the top job in September while remaining chairman.
Buffett admires him, and Cook could bring stature and tech savvy to a company that isn't a leader in employing technology. Berkshire does own about $60 billion of Apple stock, but that issue likely could be finessed to get Cook.
Berkshire is in better shape than its stock price suggests. For long-term investors, betting on Berkshire should pay off -- even after a legendary investor passes from the scene.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 24, 2026 03:00 ET (07:00 GMT)
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