Berkshire Hathaway Stock Is Trailing the S&P 500 by About 10 Points This Year. History Says That Usually Doesn't Last.

Berkshire Hathaway (NYSE:BRKA)(NYSE:BRKB) has gone almost nowhere in 2026. The B shares trade near $510 as of this writing, up about 2% for the year. The S&P 500 (SNPINDEX:^GSPC) has gained about 11% over the same stretch.

A 10-point deficit is unusual for this company. But it has happened before.

Berkshire's annual report carries a table comparing the stock's yearly change against the S&P 500's total return, dividends included, going back to 1965. On that basis, this year's gap is closer to 11 points.

That table also shows that years like this one have been uncommon -- and usually followed by something better.

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Berkshire has usually snapped back

Since 1990, Berkshire has finished a year 10 or more percentage points behind the index nine times, most recently in 2023. In seven of those nine years, Berkshire beat the S&P 500 the following year. The two exceptions came after 2003 and 2019, when the stock simply trailed again.

Not only does the pattern show up in recent decades, but it also holds over the table's full history. Go back to 1965, and the count grows to 13 lagging years, with Berkshire winning the year after in 10 of them.

And some of those wins were enormous. After trailing the index by more than 40 points in 1999, the stock returned about 27% in 2000 while the S&P 500 fell about 9%.

However, the recent wins have been thinner. Berkshire edged the index by less than a percentage point in 2021, and again in 2024.

Notably, Berkshire trailed last year, too, returning about 11% against about 18% for the index -- a smaller gap than the 10-point years. Finish 2026 behind, and it would be two straight years of trailing the index.

Greg Abel is already spending

What the table can't say is whether this year's Berkshire behaves like the ones that bounced. A few things are different, and I think most of them favor the stock.

The most obvious difference is at the top: Greg Abel became CEO on Jan. 1, with Warren Buffett staying on as chairman. In the table's six decades, this would be the first lagging year with someone other than Buffett running the company.

Abel inherited a war chest, and he has been spending it. Berkshire held about $365 billion in cash and Treasury bills at the end of June, down from about $373 billion at the start of the year. The company closed a $9.4 billion acquisition of OxyChem, an industrial chemicals business, in early January. A second deal followed in late July, after the quarter closed -- homebuilder Taylor Morrison, for about $6.8 billion. And Berkshire repurchased about $4.5 billion of its own shares during the second quarter.

"Many times in Berkshire's history, some observers have suggested that our substantial cash position signals a retreat from investing. It does not," Abel wrote in his first annual letter to shareholders, released in February.

The operating businesses are doing their part, too. Second-quarter operating earnings rose 16% year over year, and the first-half total rose 17%, to $24.3 billion. Operating earnings exclude the investment gains and losses that swing Berkshire's results under generally accepted accounting principles (GAAP).

Much of this year's jump, though, came from currency moves on Berkshire's non-U.S.-dollar debt. Exclude those, and first-half growth was about 6%. That is still a rebound from 2025, when full-year operating earnings slipped to $44.5 billion from $47.4 billion.

Time to buy the laggard?

The streak alone isn't a reason to buy the stock.

But there may be a simple reason the pattern exists. A year in which the share price goes nowhere while earnings keep growing leaves the stock cheaper, relative to those earnings, at the end than at the start. In other words, a lagging year often means the next year starts with a better-priced stock. That is happening now.

Across its past four quarters, Berkshire's operating earnings total about $48 billion. At about $510 per share, the whole company is valued near $1.1 trillion, or about 23 times those operating earnings.

The cash and Treasury bills account for about a third of that market value, though. Not cheap, but arguably a fair price for a collection of insurance, railroad, energy, and manufacturing businesses like this one.

Sure, the S&P 500 could win again next year, as it has before. And the misses after 2003 and 2019 show the snapback doesn't run on a schedule.

Ultimately, though, with earnings growing again, buybacks resumed, and $365 billion waiting on Abel's next idea, I'd rather own the laggard here than bet on a third straight year of it. I'd buy the stock at this level. The history is just a bonus.

Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.