Berkshire shares losing value fast as ‘Buffett premium’ disappears

Shares of Berkshire Hathaway have plummeted more than 10% since May 3, around the time Warren Buffett revealed he would step down as chief executive officer by the end of the year. The decline contrasts with the uptick seen in the S&P 500 index during the time period. 

Market watchers now argue that the “Buffett premium,” the extra valuation investors assign to Buffett’s leadership, is fading.

Berkshire’s performance trails the broader stock market index by nearly 15 percentage points since Buffett’s retirement announcement. The conglomerate’s Class A shares, which hit an all-time high on May 2, have also retreated by 10%. Some analysts believe the correction may not be over.

Buffett, 93, plans to relinquish his CEO duties on December 31, 2025, due to “physical effects of aging,” while retaining his seat as chairman of the board.

During the meeting, Buffett also stated he would not sell any of his Berkshire Hathaway shares. “I have no intention, zero, of selling one share of Berkshire Hathaway,” he said, receiving applause from the audience. “It will get given away.”

Buffett premium ‘disappears,’ earnings drop

According to stock market analysts, the Berkshire Hathaway share sell-off is partly attributed to the “evaporation” of the Buffett premium. 

David Kass, a finance professor at the University of Maryland and longtime Berkshire shareholder, is surprised the stocks are underperforming while Buffett is still leading the company for the remainder of the year. 

“This relative decline may approach as much as 20% in the weeks ahead as some shareholders may become discouraged by Berkshire’s recent price performance,” Kass predicted.

Kevin Heal, an equity analyst at Argus Research who covers Berkshire Hathaway, noted that initial losses in the stock were likely triggered by algorithmic trading reactions to the leadership transition news. Subsequent declines, he said, appeared more fundamentally driven, tied to the company’s businesses and recent earnings performance.

In the first quarter of 2025, Berkshire’s operating earnings, which include its wholly owned insurance, energy, and railroad subsidiaries, dropped 14% to $9.64 billion. 

Valuation range falls as confidence wanes

At its peak in early May, Berkshire Hathaway was trading at approximately 1.8 times its March 31 book value. That ratio has since fallen to around 1.6 times, bringing it closer to its average historical range of about 1.5. 

Some investors see this as a sign that the sell-off may be approaching a natural bottom, though others are waiting for the market to digest both structural and emotional adjustments to a post-Buffett Berkshire.

The conglomerate’s current market capitalization is still above $1 trillion. However, analysts are closely watching how the company will adapt under new leadership and if Abel can preserve, or even improve, the shareholder value created during Buffett’s 60-year tenure.

Buffett told the Wall Street Journal on May 14 that he plans to continue working from Berkshire’s Omaha headquarters after stepping down as CEO. “I’m not going to sit at home and watch soap operas,” he said. “My interests are still the same.”

Succession planning spotlight on Abel

Greg Abel is a trusted lieutenant who has helped Buffett manage Berkshire’s network of non-insurance businesses. Abel joined Berkshire Hathaway in 1999 after it acquired a controlling stake in MidAmerican, where he was serving as president. 

He became CEO of MidAmerican in 2008, before it was renamed Berkshire Hathaway Energy.

Shareholders expect Abel to keep the company’s culture of long-term value investing and decentralized management. 

Beyond the investment anthem, they could push the new CEO to open doors to emerging technologies, which could subtly change Berkshire’s investment philosophy. Buffett insists that Berkshire’s succession plans are meant to keep the firm stable beyond his retirement. 

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