Key Takeaways
- Berkshire Hathaway’s B shares have underperformed the S&P 500 in 2025, posting a 4.5% year-to-date return compared to the index’s 7.0%, with the gap widening since Warren Buffett’s succession announcement.
- The conglomerate’s performance has been weak, recording a 12% decline since 3 May 2025 and a Q2 return of just 1.2% versus the S&P 500’s 10.9%.
- Structural factors, including a record cash hoard of $189 billion and a portfolio weighted towards traditional industries, are cited as reasons for trailing a tech-driven market.
- Uncertainty surrounding the leadership transition to Greg Abel and the challenge of replicating Buffett’s investment strategy are weighing on market sentiment and institutional investor confidence.
The sharp underperformance of Berkshire Hathaway in 2025, particularly in the wake of Warren Buffett’s announced departure from day-to-day leadership, marks a pivotal moment for the conglomerate. Recent data indicates that Berkshire’s B shares have lagged significantly behind the S&P 500, with a year-to-date return of just 4.5% compared to the index’s 7% gain as of the close on 22 July 2025. This gap, one of the widest in recent memory, raises critical questions about the company’s ability to maintain its historical edge without Buffett at the helm. While sentiment on platforms like X, including commentary from accounts such as unusual_whales, reflects growing concern, the deeper story lies in structural challenges and market dynamics that warrant scrutiny.
Recent Performance Metrics: A Stark Contrast
Berkshire Hathaway’s struggles in 2025 are not merely a matter of perception but are grounded in hard numbers. The company’s B shares have recorded six negative weeks out of the past seven, with a decline of over 12% since the succession announcement on 3 May 2025. This contrasts sharply with the S&P 500, which has continued its upward trajectory, buoyed by technology and growth sectors. For the second quarter of 2025 (April to June), Berkshire’s performance was notably weaker, with a return of approximately 1.2% against the S&P 500’s 10.9% gain for the same period, as reported by investment funds like Madison Large Cap Fund.
To put this into perspective, consider the following comparison of returns over key periods in 2025:
| Period | Berkshire Hathaway B Shares | S&P 500 |
|---|---|---|
| Q1 2025 (Jan-Mar) | 3.3% | 5.2% |
| Q2 2025 (Apr-Jun) | 1.2% | 10.9% |
| Year-to-Date (as of 22 Jul 2025) | 4.5% | 7.0% |
These figures, drawn from market close data and fund reports, highlight a persistent divergence that cannot be dismissed as a temporary blip. The question is whether this reflects a fundamental shift in Berkshire’s competitive position or a market overreaction to leadership changes.
Structural Challenges and Market Sentiment
Berkshire Hathaway’s historical outperformance—delivering a staggering 5,502,284% return since 1965 compared to the S&P 500’s 39,054% over the same span—has been rooted in Buffett’s value-driven investment philosophy and operational acumen. However, the conglomerate’s vast size and diversified portfolio, spanning insurance, energy, and consumer goods, may now be a double-edged sword. With a cash pile of $189 billion as of the end of Q1 2025, up from $167.6 billion in Q4 2024, the company faces criticism for sitting on capital rather than deploying it into high-growth opportunities. This conservative stance, while prudent in volatile markets, struggles to match the returns of a tech-heavy S&P 500.
Market sentiment in 2025 has also shifted. The announcement of Buffett stepping back has triggered uncertainty about the firm’s future direction under successors like Greg Abel. While Abel’s track record at Berkshire Hathaway Energy is solid, the transition inevitably invites scepticism about replicating Buffett’s unique blend of patience and opportunism. Reports suggest that institutional investors, including those tracked by financial news outlets, are recalibrating expectations, with some predicting a prolonged period of underperformance relative to broader indices.
Historical Context: A Fading Edge?
It’s worth noting that Berkshire’s outperformance has not been uniform even in recent decades. In the 1980s and 1990s, annualised returns often doubled those of the S&P 500, but the gap has narrowed since the 2000s as the company’s scale limits outsized gains. For instance, in 2023, Berkshire’s operating earnings rose 17% to $37.350 billion, a robust figure, yet its stock return of 15.5% for the year still trailed the S&P 500’s 24.2%. Fast forward to 2025, and the trend appears to have accelerated, with the company no longer seen as a reliable market-beater in the short term.
This is not to say Berkshire lacks resilience. Its diversified revenue streams and substantial cash reserves position it well for downturns, as evidenced by its outperformance during the last three recessions. Yet, in a bull market driven by innovation and digital disruption, a portfolio weighted towards traditional industries may struggle to keep pace.
Looking Ahead: Can Berkshire Regain Ground?
The outlook for Berkshire Hathaway in the second half of 2025 remains uncertain. Analyst projections for the S&P 500 vary widely, with targets ranging from a conservative 6,400 by UBS to an optimistic 7,100 by Oppenheimer. If the index continues to climb, Berkshire’s relative underperformance could widen further. However, a market correction—potentially signalled by Stifel’s forecast of a 12% drop in the S&P 500—might play to Berkshire’s strengths, allowing it to deploy capital at attractive valuations.
For now, the data suggests that Berkshire Hathaway is at a crossroads. The firm’s legacy of value creation is undisputed, but adapting to a post-Buffett era while navigating a growth-obsessed market will test its mettle. Investors would do well to temper expectations of near-term outperformance, focusing instead on the conglomerate’s long-term stability. After all, in a world of fleeting market darlings, there’s a certain irony in watching a titan like Berkshire stumble—not for lack of strength, but for being too steadfast in a race that rewards speed over endurance.
References
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