Berkshire Stock Ends Quarter on Sour Note. It’s About Even With S&P 500 So Far in 2025.

Berkshire Hathaway trading shares are displayed on the floor of the New York Stock Exchange. (Michael M. Santiago/Getty Images)

Another day, another session of underperformance of Berkshire Hathaway stock versus the S&P 500.

Berkshire Hathaway finished the second quarter on a disappointing note as the company’s Class A shares fell 0.3% to $728,800 while the B shares were unchanged at $485.77. They both trailed the S&P 500 which rose 0.5% to 6205, a new closing high.

Berkshire has trailed the index on 25 of the past 39 trading sessions since CEO Warren Buffett, 94, surprised the company’s shareholders at the annual meeting in Omaha on May 3 by saying he would step down as CEO at year-end after 60 years at the helm. He will remain chairman.

On the Friday before the meeting, the A stock closed at a record $809,350 and was up about 18% for the year, 21 percentage points ahead of the S&P 500.

Berkshire has fallen 10% since then and is now up 7% in 2025, narrowly ahead of the index’s 6% total return.

With the underperformance, Berkshire is about even with the S&P 500’s annualized total return of 13.5% over the past 10 years, Bloomberg data show. This shows the difficulty in beating the technology-led gains in the S&P 500, even for someone with Buffett’s investment and business acumen.

The selloff lately in Berkshire may reflect several factors, notably some reduction in the ‘Buffett premium” embedded in the stock. At the May high, Berkshire traded at 1.8 times book value, its highest level in more than a decade, and for 27 times estimated 2025 earnings.

There also could be some concern that property and casualty insurance pricing in some business lines is peaking. Berkshire owns the largest P&C company in the world. Berkshire’s Geico auto insurance unit has been experiencing record profitability and that may not last.

Berkshire’s earnings are expected to be down this year. UBS analyst Brian Meredith cut his earnings estimates in early June with his 2025 projection falling about 5% to $19.92 per class B share, down about 8% from 2024. Some of the year expected drop in profits this year likely reflects a weakening dollar, which lifts the value of Berkshire’s yen-denominated debt that Buffett issued to help fund its investments of over $20 billion in five Japanese trading companies. A higher liability is a negative for earnings. Investors probably should strip out the currency effects on earnings to get a truer measure of financial performance.

Berkshire doesn’t offer adjusted earnings so investors need to make the calculations for themselves.

There also may be some disappointment that Buffett was cautious during the stock-market decline earlier this year and was a net seller of stocks in the first quarter, continuing a trend from 2024, when he sold over $110 billion of Apple stock. Buffett has allowed Berkshire’s cash levels to build to over $330 billion, a record amount.

Berkshire stock now is now trading more reasonably at 1.6 times the March 31 book value of about $455,000 per class A share and about 24 times estimated 2025 earnings. The P/E ratio is lower if investors give credit to Berkshire for the profits of the company’s in its $300 billion equity portfolio.

The lower valuation could help put a floor under the stock.

Some Berkshire investors also would like to see Buffett resume stock buybacks as Berkshire hadn’t bought stock from May 2024 through late April of this year. The lack of buybacks was an indication that Buffett has viewed the stock as fully priced.

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