Berkshire Stock Was Hammered Monday. It’s Like 1999 Again.

Berkshire Hathaway investors would like to see is a resumption of stock repurchases—a sign CEO Warren Buffett views the stock as appealing. (Alex Wong/Getty Images)

It’s starting to look a little like 1999 for Berkshire Hathaway investors.

Berkshire stock was hammered Monday with both the class A and B shares down nearly 3% in the wake of the company’s second-quarter earnings report Saturday.

The operating earnings actually were strong, rising 8% to $12 billion after taxes in the period excluding currency swings. But investors may be mildly disappointed Berkshire didn’t buy back any stock in the period, continuing a stretch of no repurchases dating back to May 2024.

Berkshire’s Class A shares were down 2.7% to $692,600 while B shares fell 2.9% to $459.11. The S&P 500 was up 1.5%. These were the biggest percentage losses for Berkshire since May 5, the first trading day after Warren Buffett said he would step down as CEO at year end.

Another issue is a write-down of over $3 billion that Berkshire took in the period on its roughly 25% stake in Kraft Heinz . But that impairment was noncash and merely aligned the carrying value of the stake with the market value of stock, now around $9 billion.

A bigger issue may be that this is a risk-on market in which growth stocks like Palantir are surging and many value stocks are lagging. Berkshire is the ultimate value stock—the largest in the Russell 1000 value index.

“This is a risk-loving market and animal spirits” are rising, says Dan Hanson, a portfolio manager at Neuberger Berman, which counts Berkshire among its largest holdings. Hanson runs the Neuberger Berman Quality Equity Fund Investor.

During 1999 and early 2000, before the tech bubble peaked in March 2020, the Nasdaq 100 more than doubled, while Berkshire stock was down nearly 50% to a low under $50,000 per A share.

The situation reversed in the ensuing year as the Nasdaq bubble burst and the NDX index tumbled 60% while Berkshire surged 70%.

Berkshire investors hope that history repeats. Both A and B shares are down 15% since peaking on May 2 while the S&P 500 is up over 10% and the Nasdaq 100 is up 15%. Berkshire now is behind the market with a 2% year to date gain against an 8% return for the S&P 500. The company’s market value has dipped below $1 trillion for the first time since early 2025.

Hanson says Berkshire is appealing. “It has an incredible, proven mix of businesses. It plays a sound role as part of a balanced portfolio.”

The valuation on the stock has come down sharply since May and Berkshire now trades under 1.5 times its June 30 book value of around $464,000 per A share, down from 1.8 times at the peak in May. The stock trades for about 22 times projected 2025 earnings, a discount to the market.

KBW analyst Meyer Shields wrote Sunday he expected the shares to trade higher after an earnings beat. He slightly boosted his price target to $740,000 from $735,000 per A share while keeping a Market Perform rating.

One thing Berkshire investors would like to see is a resumption of stock repurchases—a sign Buffett views the stock as appealing. That is a distinct possibility given the pullback in the shares but investors likely won’t know about that until early November when the company reports third-quarter earnings.

Berkshire bought back stock at a higher price/book ratio in early 2024 when the company repurchased stock held by Ruth Gottesman, the widow of Berkshire director Sandy Gottesman, who was close to Buffett and a Berkshire board member.

A catalyst for Berkshire could be a deal to buy CSX and create a second transcontinental rail network following the Union Pacific / Norfolk Southern deal. Berkshire owns BNSF, which competes with Union Pacific. Such a deal for CSX for $80 billion or so would absorb a chunk of the company’s over $300 billion of cash.

This could be an opportune time to buy Berkshire with the stock under pressure for seemingly nonfundamental reasons.

Write to Andrew Bary at andrew.bary@barrons.com