As Warren Buffett readies to relinquish his role as CEO of Berkshire Hathaway Inc. (NYSE:BRK), investor concerns are mounting, leading to a decline in the company’s stock performance since the announcement.
According to a report, the Berkshire’s B shares have dipped by 11.5% since Buffett’s unexpected announcement in May.
The shares, which had been outperforming the S&P 500 by 22.4 percentage points for the year, are now trailing the benchmark index by 10.9 percentage points.
However, on Saturday, the company reported a strong rebound in operating profit, alongside a record-high cash reserve and no new share buybacks.
Operating profit from the conglomerate's core businesses, including insurance, railroads, and energy, surged 34% year-over-year to $13.49 billion in the third quarter, fueled by a more than 200% jump in insurance underwriting income to $2.37 billion.
The company shared that it did not repurchase any shares during the first nine months of 2025. Berkshire's Class A and Class B shares have each gained about 5% this year, trailing the S&P 500's 16.3% rise.
As per the report by CNBC, Analysts at Keefe, Bruyette & Woods voiced their concerns, downgrading their rating on Berkshire’s A shares from “market perform” to “underperform” and reducing their price target to $700,000 from $740,000. They primarily attribute the stock’s underperformance to Buffett’s impending exit.
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The analysts also underscored what they refer to as Berkshire’s “historically unique succession risk,” alluding to the company’s dependence on Buffett’s reputation and the potential lack of disclosure that may deter investors once he steps down. The incoming CEO, Greg Abel, may not enjoy the same leniency from Wall Street in Buffett’s absence.
Despite these concerns, some are optimistic that Berkshire’s operating companies will continue to generate substantial cash flow, regardless of Buffett’s departure. Northstar Group’s Henry Asher expressed confidence in the continuity of the businesses, even if Abel’s stock picking ability doesn’t match Buffett’s record.
It has also been confirmed that Abel will be writing the annual letter to shareholders starting next year, a task previously undertaken by Buffett.
The impending CEO transition at Berkshire Hathaway marks a significant shift in the company’s leadership. Buffett’s departure could potentially impact investor confidence, given his long-standing influence and success in the company.
The underperformance of Berkshire’s stock since the announcement of Buffett’s exit underscores the investor anxiety surrounding this change.
The ability of the new CEO, Greg Abel, to uphold the company’s performance and maintain investor trust in the post-Buffett era remains to be seen.
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