Anne Marie
When Warren Buffett officially steps down at the end of 2025, he’ll leave behind a business empire unlike any other in American investing history. But with that announcement came an investor reaction few found surprising: Berkshire Hathaway stock has dropped roughly 12% since Buffett broke the news.
The market seems spooked. But is that a reason to sell—or is this a rare opportunity to buy one of the most robust holding companies in the world at a discount?
The “Buffett Premium” Is Shrinking—But Not Gone
Berkshire Hathaway has long traded with what’s often referred to as the “Buffett Premium”—a valuation edge baked into the stock simply because Warren Buffett runs the company. Investors trust his judgment, his value-first dealmaking, and his reluctance to waste capital.
Now, with Buffett planning to exit, that premium is slipping. Since May, Berkshire has underperformed the S&P 500 by 10–12%.
But it's worth noting that investor panic around legendary leadership transitions isn't new. Apple once faced similar doubts when Steve Jobs stepped away. In hindsight, those fears were overblown. Apple thrived. The same could be true for Berkshire—especially given the business fundamentals still in place.
A Strong Business Built to Last
Berkshire Hathaway isn’t a typical stock—it’s a diversified powerhouse with operations that span railroads, insurance, utilities, manufacturing, and consumer brands. With a market cap around $1 trillion and a war chest of over $347 billion in cash, the company has more flexibility than perhaps any other in America.
Importantly, Buffett’s successor is no unknown. Greg Abel, a Berkshire insider who’s run the company’s non-insurance businesses since 2018, is respected for his operational discipline and long-term thinking. He’s not Buffett—but he doesn’t need to be. The system Buffett built was designed to function without him.
Chris Hill, longtime host of Motley Fool Money and current host of Money Unplugged, considers Berkshire one of his “forever” stocks. In a recent episode of the Stock Club podcast, Hill named Berkshire as one of just three companies he’d be happy to buy today and hold indefinitely—alongside Axon Enterprises and CRISPR Therapeutics. That’s a strong vote of confidence from one of the investing world’s most respected voices.
Is Berkshire Hathaway Overvalued?
It depends on who you ask. Some valuation models suggest that the stock—particularly BRK.A—is trading above its intrinsic value. Morningstar, for instance, places BRK.B’s fair value around $487, which is lower than its current price. Alpha Spread estimates that BRK.A is trading nearly 30% above its model’s fair value.
But not all analysts agree. Some believe the company’s earnings power, balance sheet strength, and long-term cash flow more than justify the current price—especially in a market light on “sleep-well-at-night” compounders. For many investors, Berkshire remains a relative safe haven.
Key Risks to Watch
The biggest risk on everyone’s mind is whether Greg Abel can fill Buffett’s shoes. While Abel is a known quantity within Berkshire, he hasn’t yet been tested in the spotlight of public markets in the same way Buffett has. How he approaches major decisions—particularly acquisitions and capital allocation—will be closely watched.
Another concern is what happens with the $350 billion in cash. While Buffett has historically been patient and disciplined with that money, investors will expect Abel to deploy it intelligently—either through buybacks, dividends, or acquisitions.
Finally, some of Berkshire’s core businesses—especially GEICO—have come under margin pressure in recent quarters. Weak performance in key subsidiaries could weigh on results if not addressed.
Related Questions Investors Are Asking
Is Berkshire Hathaway overvalued?
Possibly. Some analysts believe the company’s stock trades at a premium to its intrinsic value, but others argue that quality justifies the price.
Should I buy Berkshire A or B shares?
Both offer identical economic exposure. Class A (BRK.A) is more expensive and can’t be split, while Class B (BRK.B) is designed for accessibility to retail investors.
Will Berkshire pay dividends after Buffett retires?
Unlikely. Berkshire has long resisted dividends in favor of reinvestment. However, a massive cash position means it’s a topic that could resurface under new leadership.
How will Greg Abel allocate Berkshire’s cash?
Abel is seen as an operator rather than a dealmaker, but he’s expected to be more flexible than Buffett when it comes to deploying capital. Investors should watch for signs of M&A or new capital return policies.