Since May 3, when Buffett revealed his intention to hand over the reins of the Omaha-based investment group, Berkshire’s Class B shares have shed more than a tenth of their value. The decline has pared year-to-date gains to just 4.5%, falling short of the S&P 500’s 7% advance over the same period.
The slump has extended into the summer months, with the stock logging losses in six of the past seven weeks. Should it finish July in negative territory, it would mark Berkshire’s third consecutive monthly decline, its longest such stretch since June 2022.
Market rethinks post-Buffett future
The sell-off highlights market unease over the company’s future in the absence of its long-standing leader. Buffett, who transformed Berkshire from a struggling textile firm into a sprawling conglomerate over six decades, has been a singular presence in global investing. His departure raises questions about whether the group’s next generation of leaders can maintain the same performance edge.Still, Buffett has long sought to temper expectations about Berkshire’s future returns.
“With our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital,” he wrote in his 2023 annual letter. “Anything beyond ‘slightly better,’ though, is wishful thinking.”
He also acknowledged the difficulties of deploying Berkshire’s vast cash pile, noting that the scale of the company makes it harder to find investments capable of moving the needle.
Legacy remains intact
Despite recent weakness, Buffett’s long-term record at Berkshire remains unmatched. Since taking control in the 1960s, he has delivered a cumulative return of 5,502,284%, more than twice the average annual gain of the S&P 500 over that period.Even so, as the conglomerate adjusts to a future without Buffett at the helm, the stock’s underperformance suggests that markets are beginning to recalibrate their expectations, not just for earnings, but for the intangible value of the Buffett brand itself.
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