No. of Recommendations: 3
“ Berkshire shares attract interest as they slip further behind the S&P
Berkshire Hathaway shares fell roughly 1% this week while the S&P 500 edged 0.6% higher, ending the week at a fresh all-time high.
Warren Buffett Watch Graph
That has increased the B shares' relative underperformance versus the benchmark to 11.3 percentage points for the year so far. It was a 9.7 percentage point gap last Friday.
Warren Buffett Watch Graph
The A and B shares are now down 13% from their all-time closing highs almost a year ago in early May, just before Warren Buffett revealed he planned to step down as CEO at the end of 2025.
The S&P has gained 26% over the same period.
Warren Buffett Watch Graph
Berkshire's stock price drop, however, is making the shares more attractive to some.
In a featured Barron's analysis, Andrew Bary writes that at the company's current price "not a lot has to go right ... to generate market beating returns -- even without Warren Buffett at the helm."
Christopher Davis at Hudson Value Partners is quoted as saying investors are overlooking Berkshire when they buy "HALO" (Heavy Assets, Low Obsolescence) stocks like Caterpillar to avoid potential AI disruptions. (The term was coined by "Halftime Report" regular Josh Brown.)
"Berkshire is the ultimate HALO company, given the durability and inflation protection of the insurance business and the very-hard-to-replicate industrial operating businesses," Davis argues.
He calls the stock a "coiled spring" at its current price.
Warren Buffett Watch Graph
Stock buybacks are another potential positive.
In a note to clients this week, UBS analyst Brian Meredith estimates Berkshire is trading at an 8% discount to its intrinsic value. The company's stated policy is to buy back shares when "the repurchase price is below our intrinsic value, conservatively determined."
In March, a filing revealed Berkshire had resumed buybacks for the first time in almost two years but provided no details.
With the price down almost 4% since then, Meredith expects the company kept buying. He's raising his 2026 repurchase expectations to $1.7 billion, up from 0, which he thinks will make the stock more attractive to investors.
On the negative side, Barron's says there is "probably some room for improvement ... on the operational and investments sides."
CRFA analyst Cathy Seifert is quoted saying, "Operating revenues were flat at Berkshire last year. I'd like to see Greg Abel confront the issues and outline a plan for profit and revenue improvement."
He will have a chance to do that in one week at the Berkshire shareholders meeting, live on CNBC.com.“
