--- title: "One Year After Buffett's Retirement: \"Buffett Premium\" Turns into \"Discount,\" Berkshire Hathaway Drops 13%, Is the Stock Undervalued?" type: "News" locale: "en" url: "https://longbridge.com/en/news/284167452.md" description: "Berkshire Hathaway's stock price has fallen into a \"discount dilemma\" due to underperforming the broader market by 40%. As the market remains cautious about successor Greg Abel, the valuation has retreated to 1.4 times book value. Analysts believe that the company's annual earning power of $50 billion and cash flow of $373 billion provide a strong safety cushion, while the resumption of share buybacks highlights its investment value. This may be an opportune time to position in a \"discounted\" version of Berkshire Hathaway" datetime: "2026-04-27T07:15:27.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284167452.md) - [en](https://longbridge.com/en/news/284167452.md) - [zh-HK](https://longbridge.com/zh-HK/news/284167452.md) --- # One Year After Buffett's Retirement: "Buffett Premium" Turns into "Discount," Berkshire Hathaway Drops 13%, Is the Stock Undervalued? Nearly a year has passed since Warren Buffett announced his retirement, and Berkshire Hathaway's stock price has experienced one of its most severe periods of underperformance relative to the S&P 500 Index in its history—the once-coveted "Buffett Premium" has now evolved into a clear discount. However, several analysts believe that this very discount makes Berkshire Hathaway an investment target worth watching at present. Since Buffett announced his retirement at the annual shareholders' meeting on May 2, 2025, Berkshire Hathaway Class A shares have cumulatively fallen by approximately 13%, while the S&P 500 Index returned about 26% over the same period, resulting in a gap of nearly 40 percentage points. **Since the beginning of 2026, Class A shares have further declined by about 6% to $706,000, while Class B shares have weakened in tandem to around $470, whereas the S&P 500 has risen by approximately 4% year-to-date.** The market's cold reception is particularly evident in valuations: the ratio of Berkshire Hathaway's stock price to its book value has dropped significantly from a 25-year high of about 1.8 times a year ago to less than 1.4 times currently, which is below the average of the past three years. Meanwhile, the company resumed stock buybacks in March this year, nearly two years after its previous repurchase. Several analysts stated that **the current stock price has fully, or even excessively, reflected market concerns regarding Greg Abel's leadership capabilities, presenting a potential opportunity for long-term investors to establish positions.** ## Disappearance of the "Buffett Premium": How Large Is the Discount? The weakness in Berkshire Hathaway's stock price reflects market concerns over multiple factors: the fading of Buffett's personal aura, the market's wait-and-see attitude toward Abel, sluggish revenue growth, and doubts about the company's ability to effectively deploy its massive cash reserves. Based on the current stock price, Berkshire Hathaway trades at a price-to-earnings (P/E) ratio of approximately 23 times its expected earnings for 2026. However, considering the large amount of low-yield cash and investments held on the company's balance sheet, the actual P/E ratio is in the high teens after adjusting for these factors, indicating relatively limited valuation pressure. Book value has historically been an important reference indicator for measuring Berkshire Hathaway's stock price. According to calculations by Barron's, **the company's book value per share in the first quarter was approximately $505,000, meaning the current stock price is equivalent to less than 1.4 times book value.** Regarding intrinsic value estimates, Chris Bloomstran of Semper Augustus Investments, a long-time researcher of Berkshire Hathaway, provided a valuation of $855,000 per share earlier this year, representing a premium of about 21% over the current stock price. Brian Meredith, an analyst at UBS, valued the stock at $758,000 per share, a premium of about 7%. Meredith assigned a Buy rating to the stock with a target price of $871,000, implying an upside potential of nearly 25% from current levels. ## Solid Fundamentals: Cash and Earnings Build a Safety Cushion Despite pressure on the stock price, Berkshire Hathaway's fundamentals still provide a substantial margin of safety. The company's underlying businesses have an annual earning power of approximately $50 billion, and it holds about $373 billion in cash on its balance sheet available for new investments. The scale of stock buybacks this year could reach $50 billion. According to Barron's calculations based on Berkshire Hathaway's proxy statements, the company purchased over $200 million worth of stock on March 4, the day it resumed buybacks. As the stock price subsequently fell by another 3%, the intensity of buybacks may have continued or even increased. The company will release its first-quarter financial results and Form 10-Q report on May 2, the day of the annual shareholders' meeting, at which time specific buyback data will be disclosed. Christopher Davis, an investor at Hudson Value Partners, characterizes Berkshire Hathaway as the **"ultimate HALO stock" (heavy-asset, low-obsolescence risk stocks).** He pointed out that the durability and inflation-resistant nature of its insurance business, along with its hard-to-replicate portfolio of industrial operations, make Berkshire Hathaway particularly attractive amidst market concerns triggered by the impact of artificial intelligence, likening the current stock price to a "coiled spring ready to release." Berkshire Hathaway's core assets include Burlington Northern Santa Fe (BNSF), one of the largest railways in North America; Berkshire Hathaway Energy, one of the largest electric utilities in the United States; and a series of industrial enterprises such as Lubrizol (chemicals) and Precision Castparts (aerospace components). ## Operational and Deployment Challenges Facing Abel Abel, who is succeeding Buffett, is not without facing skepticism. CFRA analyst Cathy Seifert pointed out that Berkshire Hathaway's operating income saw almost zero growth last year. She expressed hope that Abel would directly address existing issues and present a clear plan for improving profits and revenue. UBS's Meredith also believes that both BNSF and Berkshire Hathaway Energy lag behind their peers in key profit metrics, leaving room for improvement. In terms of capital deployment, Abel needs to clarify to the market how he intends to utilize this massive cash reserve. While most of the company's cash is available for investment, a certain amount must be reserved to support its vast property and casualty insurance business. Regarding equity portfolio management, Abel will personally oversee the vast majority of the approximately $300 billion equity portfolio, while long-term investment manager Ted Weschler has been authorized to manage only about 6% of it, slightly higher than the 5% during Buffett's tenure. Previously, Buffett had envisioned Weschler and Todd Combs jointly managing the entire portfolio, but Combs left last December to take an investment role at JPMorgan Chase. Analysts point out that Abel lacks formal portfolio management experience and has primarily focused on operations. Therefore, it is necessary to bring in more investment talent and grant Weschler greater authority. ## Governance Structure Needs Improvement: Board May Welcome New Blood At the corporate governance level, Berkshire Hathaway's 13-member board includes two of Buffett's children, who have long been relatively compliant with Buffett. Their independence needs to be strengthened following his departure as CEO. Analysts believe that Apple CEO Tim Cook, who will step down as CEO but remain as Chairman this September, would be an ideal candidate to join Berkshire Hathaway's board. Not only is he highly regarded by Buffett, but he can also bring influence and a technological perspective to a company that is not a leader in technology application. Currently, Berkshire Hathaway holds approximately $60 billion worth of Apple stock, and analysts believe that this conflict of interest issue can be properly addressed. Overall, several analysts believe that Berkshire Hathaway's current fundamentals are stronger than what its stock price suggests. Chris Bloomstran expects that, driven by growth in book value, Berkshire Hathaway stock could achieve an annualized return of about 10% over the next decade. For long-term investors, the rationale for betting on Berkshire Hathaway may still hold true, even though the legendary investor has stepped back from the spotlight. ### Related Stocks - [BRK.A.US](https://longbridge.com/en/quote/BRK.A.US.md) - [BRK.B.US](https://longbridge.com/en/quote/BRK.B.US.md) - [07777.HK](https://longbridge.com/en/quote/07777.HK.md) ## Related News & Research - [Warren Buffett's advice for staying calm and managing stock market declines](https://longbridge.com/en/news/283880923.md) - [Here Are All 48 Stocks Warren Buffett's Successor, Greg Abel, Is Overseeing in Berkshire Hathaway's $320 Billion Portfolio](https://longbridge.com/en/news/283463494.md) - [Berkshire CEO Abel sold stocks managed by ex-portfolio manager Combs, WSJ reports](https://longbridge.com/en/news/283206872.md) - [Warren Buffett Dumped 77% of Berkshire's Amazon Stake and Opened a New Position in This Digital Media Juggernaut](https://longbridge.com/en/news/283253591.md) - [Berkshire’s new CEO restarts stock buybacks, buys shares himself](https://longbridge.com/en/news/277966980.md)