Berkshire Hathaway (BRK.A 0.95%) (BRK.B 1.11%) shares have advanced 9% year to date, but the stock has actually tumbled 8% over the last month because CEO Warren Buffett shocked Wall Street on May 3 when he announced plans to retire this year.
Buffett recently said he has no plans to sell any Berkshire stock and reiterated his confidence in successor Greg Abel, currently CEO of Berkshire Hathaway Energy. "I think the time has arrived where Greg should become chief executive officer of the company at year end," Buffett told attendees at the recent shareholder meeting.
However, Buffett's business acumen has been a central part of the investment thesis for decades. With his retirement imminent, is Berkshire stock still a buy?
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Warren Buffett turned Berkshire into a trillion-dollar company
Warren Buffett took control of Berkshire Hathaway in 1965. While the last six decades have been nothing short of phenomenal for the company, Buffett says that in hindsight, he showed poor judgment. "Though the price I paid for Berkshire looked cheap, its business -- a large northern textile operation -- was headed for extinction," he wrote in his 2025 shareholder letter.
Fortunately, Buffett soon realized his mistake and pivoted toward non-textile operations, the most important of which was insurance. His purchase of National Indemnity, a property and casualty insurance company, in 1967 charted a new course for Berkshire. Moving into insurance created a steady stream of investable capital in the form of premium payments, and Buffett has invested that capital to great effect over the years.
Today, Berkshire is one of only 10 trillion-dollar companies. Its stock price has increased nearly 6,000,000% since Buffett assumed control in 1965, compounding at 20% annually. Meanwhile, the S&P 500 has returned about 10.4% annually. That outperformance was due in large part to savvy acquisitions, stock purchases, and share buybacks architected by Buffett, such that he has rightly earned a reputation as one of the greatest investors in American history.
Warren Buffett says Berkshire has no chance of eye-popping performance
Buffett says Berkshire has "no possibility of eye-popping performance" in the future due to its size and the nature of its businesses. In the past, the company has expanded through acquisitions and stock purchases, but with a book value of $650 billion -- the largest of any American business -- very few investments will move the financial needle in a meaningful way for Berkshire.
Additionally, Berkshire owns dozens of subsidiaries across a diverse range of industries, including insurance, freight rail transportation, manufacturing, retail, energy, and utilities. But none of those industries are known for high growth, which means Berkshire's earnings will likely increase at a modest pace (not an astonishing one) in the future.
That doesn't automatically make Berkshire a bad investment. But investors must be aware of the constraints because high-growth businesses often warrant higher valuations. With that in mind, the stock currently trades at 1.63 times book value, near the high end of the historical range. The five-year average is 1.43. The present figure looks expensive for a business with no chance of eye-popping performance in the future.
Buffett evidently agrees. He has not repurchased Berkshire stock since the second quarter of 2024. Prior to that, he repurchased stock in 24 consecutive quarters, spending a cumulative $78 billion on buybacks. Importantly, Berkshire held $348 billion in cash and equivalents on its balance sheet in the first quarter, so the company had plenty of capital to fund buybacks. Buffett simply chose not to take action.
Here's the bottom line: Their only explanation as to why Buffett has not repurchased stock in three straight quarters is that he believes Berkshire shares are overvalued. In fact, we can assume he sees shares as less attractive than at any point since Q2 2018. And with the stock still trading near the high end of its historical price-to-book value range, I would be surprised if Buffett were buying shares today.
So, while Berkshire is undoubtedly a great business with excellent management -- and Greg Abel is an excellent choice to succeed Buffett -- I think investors should pass on the stock today and wait for a better entry point. Most Wall Street analysts agree: Berkshire's Class B shares have a target price of $490, which implies about 1% downside from the current share price of $494.
