Berkshire worries grow as Buffett’s CEO handover nears

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Two months from now Warren Buffett will no longer be Berkshire’s CEO and investors appear to be getting increasingly nervous about the year-end transition.

On May 2, the Friday before Buffett’s surprise announcement at the annual meeting that he plans to step down, Berkshire’s B shares closed at an all-time high just under $540 per share.

At that point, they were outperforming the S&P 500 by 22.4 percentage points for the year.

Today, they are 10.9 percentage points behind the benchmark index, a slight improvement from Wednesday’s 12.2 percentage point gap, the biggest so far in 2025. 

The B shares have dropped 11.5% since Buffett broke the news. That’s still above their early August low when they were down almost 15%, but below their near-term closing high of almost $507 on September 4.

Analysts at Keefe, Bruyette & Woods are especially worried.

In a report dated October 26, they lowered their rating on Berkshire’s A shares to “underperform” (sell) from “market perform” (hold) and lowered their price target to $700,000 from $740,000.

The stock closed today at $715,740.

Under the headline, “Many Things Moving in the Wrong Direction,” Meyer Shields and Jing Li write, “We believe GEICO’s likely underwriting margin peak, declining property catastrophe reinsurance rates, lower short-term interest rates, tariff-related pressure on the rails, and the risk of fading alternative energy tax credits will drive underperformance over the next 12 months.”

They attribute the stock’s underperformance relative to the S&P and other insurance stocks in recent months “mostly” to Buffett’s May announcement.

There is also what they call Berkshire’s “historically unique succession risk” that reflects “Buffett’s likely unrivaled reputation and what we see as unfortunately inadequate disclosure that will probably deter investors once they can no longer rely on Mr. Buffett’s presence at Berkshire Hathaway.”

That is, Berkshire doesn’t operate like most other corporations, in part because it doesn’t issue forecasts or meet with analysts, but investors felt they could trust Buffett. Without him, Wall Street probably won’t give the company and new CEO Greg Abel as much leeway.

In an article with a headline about Berkshire’s “New Normal … No ‘Buffett Premium,'” the Wall Street Journal quotes KBW’s Shields as saying, “There are people that have developed enormous confidence in Warren Buffett. For them, that’s where the investment thesis starts and stops.”

As a counterpoint, though, the Journal has Semper Augustus Investments Group president Chris Bloomstran arguing Berkshire was overvalued just before the May meeting, and that its YTD gain of more than 5% is significantly better than GEICO’s rival, Progressive, which is down 14%.

He’s been buying the stock and doesn’t think Buffett’s job shift is pushing the shares lower. “Everybody I know inside the Berkshire world has nothing but rave reviews and good things to say about Greg.”

And the Northstar Group’s Henry Asher told the paper that even if Abel’s stock picking ability doesn’t match Buffett’s incredible record, Berkshire’s operating companies won’t change.

“You’re not going to cancel your shipment on the Burlington Northern because Buffett isn’t there. The businesses will continue to produce mammoth amounts of cash flow, with or without Buffett.”

The Journal‘s article also confirms what we expected: Greg Abel will be writing the annual letter to shareholders starting next year.

(Buffett has already said he won’t be on stage for next May’s meeting in his role as chairman.)

Buffett clearly foreshadowed the authorship change when he wrote in this year’s letter, before his May announcement, that “it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters.”

He will, however, have letters to his three children and to shareholders on November 10, presumably to accompany the gifts to family foundations that have become a Thanksgiving tradition in recent years.

In a filing this week, Berkshire Hathaway disclosed it sold 401,514 shares of DaVita for $54 million on Monday.

DVA shares are down almost 8% this week after the dialysis company’s third quarter earnings came in below analysts’ expectations as patient costs increased and the volume of treatments declined.

For the year, the stock is down more than 20%.

This week’s relatively small sale, however, is almost certainly not a reaction to the stock’s weakness.

In a 2024 agreement with DaVita, Berkshire promised to keep its stake at or below 45% of the company’s outstanding shares.

In DaVita’s quarterly report this week, it reported that buybacks have reduced its outstanding shares from 75.5 million to 70.6 million, which would have increased Berkshire’s stake to 45.6%.

By cutting its share total to 31.8 million shares, (currently valued at $3.8 billion), Berkshire brings the stake percentage back to exactly 45.0%.

It has done similar sales in recent quarters to stay at the agreed upon level.

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Warren Buffett says the natural course of almost all governments is to devalue their currencies, and that’s “scary.”

WARREN BUFFETT: We wouldn’t want to be owning anything that we thought was in a currency that was really going to hell. And that’s the big thing we worry about with the United States currency.

I mean, the tendency of a government to want to debase its currency over time is — there’s no system that beats that.

You can pick dictators, you can pick representatives, you can do anything.

But — but the people — there will be a push toward weaker currencies.

And of course, that is — I mentioned very briefly in the annual report that fiscal policy is what scares me in the United States because it’s made the way it is.

And all the motivations are to doing a lot of things that will cause — can cause trouble with money.

But that’s not limited to the United States. It’s all over the world. And some places, it gets out of control, regularly.

You know, they devalue at rates that are breathtaking, and that’s continued. I mean, and you — people can study economics, and you can have all kinds of arrangements.

But in the end, if you’ve got people that control the currency, you can issue paper money and you will, or you can engage in clipping currencies like they used to centuries ago.

There will always be people — it’s the nature of their job, I’m not singling them out as particularly evil or anything like that.

But the natural course of government is to make the currency worth less over time, and that’s got important consequences.

And it’s very hard to build checks and balances into the system to keep that from happening.

And we’ve had a lot of fun here in the last — either the first hundred days [of the second Trump administration] or the last hundred days, whatever you want to call it — watching what happens when people try to make sure that they aren’t running fiscal risks.

And that game isn’t over, and never will be over, you know, in finality.

If you look up and search the great inflations of post-World War II, it’s just a list that goes on forever and the same names keep popping up and everything.

So, currency is — the value of currency is a scary thing.

Four weeks

Twelve months

Berkshire’s top holdings of disclosed publicly traded stocks in the U.S., Japan, and Hong Kong, by market value, based on today’s closing prices.

Holdings are as of June 30, 2025 as reported in Berkshire Hathaway’s 13F filing on August 14, 2025, except for:

The full list of holdings and current market values is available from CNBC.com’s Berkshire Hathaway Portfolio Tracker.

Please send any questions or comments about the newsletter to me at alex.crippen@nbcuni.com. (Sorry, but we don’t forward questions or comments to Buffett himself.)

If you aren’t already subscribed to this newsletter, you can sign up here.

Also, Buffett’s annual letters to shareholders are highly recommended reading. There are collected here on Berkshire’s website.

— Alex Crippen, Editor, Warren Buffett Watch