By Andrew Bary
Berkshire Hathaway's bargain-priced deal to purchase Taylor Morrison Home hasn't been enough to snap Berkshire's stock out of its yearlong slump.
The $8.5 billion deal for the home builder (including assumed debt) looks like a winning transaction for Berkshire from both a strategic and financial perspective.
Investors, however, appear to be unimpressed. Berkshire Class B shares are down 1% Monday to $469.73 and the A stock off 0.9% to $704,700.
Both classes of stock are off about 7% this year, against an 11% positive return for the S&P 500. Berkshire stock is nearly 50 percentage points behind the index since the company's annual meeting in May 2025 when Warren Buffett said he would step down as CEO at year-end 2025. That's a near-record gap for stock relative to the index.
"It's a little frustrating," says Christopher Davis, founding partner of Hudson Value Partners, a Berkshire owner.
Berkshire's stock now trades reasonably at under 1.4 times its projected book value on June 30 using a Barron's estimate. The price/book ratio peaked at 1.8 times in May 2025.
Davis says he thinks the lackluster performance of the stock this year has reflected a "show-me" attitude about Greg Abel, the new CEO. He would have thought that with Abel doing his first deal -- an admittedly modest one relative to Berkshire's $1 trillion market value- and what looks like a good one, that investors would be more enthusiastic and that the stock might be rallying. (Davis is unrelated to the money manager and Berkshire director with the same name.)
Berkshire is paying about 1.1 times book value and nine times trailing earnings per share -- both low valuations for a well-run Sunbelt home builder.
"It's a classic Berkshire deal. Taylor Morrison was selling at a discount to peers," says Cathy Seifert, an analyst at CFRA.
The price/earnings ratio is closer to 15 based on this year's projected earnings. Berkshire is paying $72.50 a share, a 24% premium to the market price on Friday.
While the deal is Abel's, it has Buffett-like elements, much like the nearly $10 billion deal for OxyChem, the chemicals business of Occidental Petroleum that closed in early January. "Both are cyclical businesses that Berkshire bought near what looks like a trough," Davis says.
The home-building business is depressed by affordability issues and higher rates. Most home-building stocks have been weak in the past year, with Taylor Morrison trading near a 52-week low on Friday.
One intriguing aspect of the deal is the potential for Berkshire to integrate some of Taylor Morrison's business with site-based operations of Berkshire's Clayton Homes unit, the leader in manufactured housing.
Abel talked about unifying the two site-based platforms in a press release announcing the deal. "I don't think I've ever seen Berkshire talk about integration in an acquisition press release," Davis said of a company that has generally resisted integration of its dozens of subsidiaries.
Berkshire also owns several home-building related companies including Benjamin Moore (paints) and Shaw (carpeting and flooring).
"One thing to watch is whether Greg integrates the disparate housing related businesses into one division," Seifert says. Another possibility is more use of Berkshire-made products in Taylor Morrison homes, like Benjamin Moore paints.
Why could Berkshire stock be lower Monday? There might be some disappointment that Abel's first deal isn't in a more exciting area -- at least among investors. And the deal doesn't do much to move the needle at a company of Berkshire's size. Berkshire is a cash-rich defensive stock in what is a risk-on, technology dominated market. The entire Taylor Morrison purchase price is equivalent to about one quarter of Berkshire's earnings after taxes.
There were some classic Berkshire-oriented aspects to the deal. It appears to have come together quickly, with negotiations occurring over just four days, according to analysis by Julian Klymochko, CEO of Accelerate Financial. Klymochko noticed in th e 8-K filing by Taylor Morrison on Monday that the two companies signed a confidentiality agreement on May 27.
"Typically companies don't negotiate deal terms until they've signed a CA," Klymochko tells Barron's. His firm is active in takeover arbitrage. He also thinks that Taylor Morrison didn't run a sales process for the company -- which would be unusual for a public company since boards normally feel an obligation to do so. The short negotiations with Berkshire suggest this, Klymochko says.
When Berkshire negotiated its deal to buy insurer Alleghany in 2022, there also was no formal sales process, but Alleghany was able to get a go-shop provision to allow other bidders to come forward more easily.
There appears to be no go-shop with Taylor Morrision, although the company will pay Berkshire a termination fee of about $221 million if it reaches a more favorable deal with another buyer.
Berkshire historically has not participated in corporate auctions and this deal seems to indicate the policy is continuing under Abel. Taylor Morrison CEO Sheryl Palmer deflected questions about the negotiations in a CNBC interview Monday, saying more details would be released in the proxy for the deal.
Berkshire also has historically done deals without the help of investment bankers -- Buffett never thought much of their advice and high fees -- and it appears Abel is continuing that tradition. The two bankers in the deal -- Goldman Sachs and Moelis -- are advising Taylor Morrison.
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
June 01, 2026 14:54 ET (18:54 GMT)
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