Shares Of Berkshire Drop In Double Digits As The 'Buffett Premium' Disappears, And Some Expect More Selling

Warren Buffett long maintained that Berkshire Hathaway’s share price would likely climb when he relinquished day‑to‑day control of the conglomerate. Yet the market’s immediate reaction to his announced exit proved different, with investors taking profits and trimming positions. Since Buffett revealed on May 3 that he intends to hand chief‑executive responsibilities to longtime lieutenant Greg Abel, Berkshire’s Class A stock has slid more than ten percent.
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That retreat translates into roughly fifteen percentage points of underperformance versus the benchmark S&P 500 index over the same stretch. Analysts attribute a sizable portion of the decline to the fading of the so‑called “Buffett premium” that had been embedded in Berkshire’s valuation for decades.
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The premium represents the extra sum shareholders were historically willing to pay in recognition of Buffett’s unmatched capital‑allocation prowess and his stellar half‑century record.
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David Kass, a finance professor at the University of Maryland who owns Berkshire shares, admitted he was startled by the depth of the sell‑off.
Kass observed that Buffett will remain at the helm until December 31 and argued that fundamentals have not worsened during the spring.
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Nonetheless, he warned that disappointment with recent price action could push additional holders to exit, potentially widening the relative lag to as much as twenty percent in coming weeks. Buffett explained that advancing age, and the physical toll of a demanding schedule, convinced him it was time to transfer daily management.
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He will continue as board chairman, ensuring strategic continuity while mentoring Abel and safeguarding the decentralized corporate culture he cultivated so carefully.
The leadership shift coincided with weaker first‑quarter financial results that may have compounded selling pressure.
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Operating earnings, which capture performance at wholly owned insurance, railroad, energy, and manufacturing subsidiaries, fell fourteen percent year over year to $9.64 billion. Kevin Heal, who follows Berkshire for Argus Research, believes the early tumble chiefly reflected algorithms unwinding positions tied to Buffett’s presence premium.
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Later losses, he contends, were driven by reassessments of underlying operating businesses and market values of Berkshire’s vast investment portfolio.
Meyer Shields of Keefe, Bruyette & Woods estimates that even after recent weakness, a residual Buffett premium of between five and ten percent remains embedded in the quote.
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That cushion, he suggests, acknowledges investors’ comfort that the legendary allocator will still influence major capital‑deployment decisions as chairman.
Kass cautions that once Buffett officially steps aside at year‑end, shares could ease further if holders decide the remaining premium is unjustified. Berkshire’s swoon is all the more striking because it followed an all‑time intraday high set on May 2, the eve of the company’s celebrated annual meeting in Omaha.
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Despite the pullback, Berkshire has market capitalization north of one trillion dollars, underscoring the conglomerate’s heft and diversified earnings power.
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The contrast between Buffett’s prediction and actual performance has prompted debate about whether personality premiums can persist in modern, data‑driven markets.
Abel, currently vice‑chairman overseeing non‑insurance operations, is widely regarded inside Berkshire as disciplined, pragmatic, and culturally aligned with Buffett’s principles.
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Still, he lacks Buffett’s celebrity status, and skeptics question whether that difference alone could shave percentage points from Berkshire’s price‑to‑book multiple.
The Federal Reserve’s path has particular relevance because Berkshire’s $189 billion cash pile is largely invested in short‑term Treasuries whose yields reset quickly. Higher rates boost interest income, partly offsetting weakness elsewhere, but they can also weigh on equity valuations and acquisition appetite.
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Meanwhile, insurance underwriting profits remain sensitive to catastrophe losses and pricing cycles, adding another variable to the earnings outlook.
Investors will scrutinize second‑quarter results in August for clues about whether operating momentum is stabilizing or slipping further.
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Share‑repurchase activity will likewise be watched closely; Berkshire bought back nearly $2 billion of its own stock during the first quarter, signaling management’s view of intrinsic value.
Should the share price continue to lag, Abel may face pressure to accelerate buybacks or pursue sizable acquisitions that deploy the mountain of liquidity.
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Ultimately, the market’s verdict on the succession will evolve over years, not weeks, as stakeholders assess whether Berkshire’s decentralized model can thrive without Buffett’s daily guidance.
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For now, the conglomerate sits at a crossroads, balancing the weight of a storied past against the uncertainties of a new era, with investors recalibrating expectations accordingly.

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