Berkshire Slumps 9.6% as Buffett Steps Back

@Victoria, this matter is related to investment insights and macroeconomic trends, so I’m assigning it to you.

Key Event: Warren Buffett's Berkshire Hathaway B shares have dropped over 12% since his announced exit in May 2025, underperforming the S&P 500 by a wide margin. The stock broke below its 200-day moving average, signaling a significant shift after decades of market dominance. Despite its strong cash-generating assets, like Coca-Cola dividends, the company's size and conservative portfolio are now seen as limiting factors in an era fueled by high-growth tech and crypto investments.

To the Editor-in-Chief,

Here is an analysis of Berkshire Hathaway's recent market performance following Warren Buffett's announcement.

A significant shift is underway for Berkshire Hathaway. Following Warren Buffett's announcement on May 3, 2025, that he will step down as CEO at the end of the year, the company's B shares have seen a notable downturn. Since the announcement, the shares have dropped by over 12%, a stark contrast to their earlier performance in the year.

This decline has pushed Berkshire Hathaway's year-to-date gain to a modest 4.5%, while the S&P 500 is up 7%. The stock has also fallen below its 200-day moving average for the first time in 573 trading days, the longest streak since the B shares were created in 1996. This recent slump marks a sharp reversal from the first few months of 2025, when Berkshire was significantly outperforming the market. For instance, as of late April, its shares had gained 17.3% for the year, while a proxy for the S&P 500 was down 6.4%.

Several factors appear to be contributing to this change in investor sentiment:

• The End of an Era: Buffett's planned transition to Chairman, with his designated successor Greg Abel taking over as CEO, marks a pivotal moment for the conglomerate he built over six decades. While Buffett has expressed full confidence in Abel, the market is reacting to the departure of a legendary figure.
• The Challenge of Size: Buffett himself has acknowledged the limitations of Berkshire's massive scale. In his 2023 shareholder letter, he stated that investors should expect the company to do "a bit better" than the average American corporation, calling anything more "wishful thinking." At the 2025 annual meeting, he reiterated this point, saying, "Size hurts Berkshire's performance; it's a challenge." The company's record cash reserves, which stood at $347.7 billion in the first quarter of 2025, are increasingly difficult to deploy in investments large enough to meaningfully impact overall returns.
• A Market Favoring Growth: Berkshire's portfolio, filled with stable, cash-generating businesses and value stocks, is currently out of step with a market captivated by high-growth technology and cryptocurrency investments. This dynamic is highlighted by Buffett's steadfast avoidance of crypto, even as the sector garners significant investor interest and optimistic performance forecasts for 2025.

Despite the stock's recent underperformance, the fundamental strength of Berkshire's assets remains formidable. A prime example is its investment in Coca-Cola. Berkshire's 400 million shares in the beverage giant generate $816 million in annual dividends. This translates to a constant stream of passive income, amounting to $2.2 million per day, or approximately $93,150 every hour.

This steady cash flow from legacy investments like Coca-Cola illustrates the core of Berkshire's traditional strength. However, the current market climate is penalizing this stability. While Buffett has consistently chosen to invest in what he understands—profitable, enduring businesses—the prevailing narrative is dominated by the potential of disruptive technologies.

In conclusion, the market is repricing Berkshire Hathaway for a future without its iconic leader at the helm and questioning whether its conservative, value-driven strategy can thrive in an era fueled by tech and crypto. While the days of doubling the S&P 500's returns may be in the past, as Buffett has suggested, the company's vast and profitable holdings will provide a formidable foundation for his successor.

April, focus your article on clearly explaining the key event driving Berkshire Hathaway’s market shift: Warren Buffett’s announcement to step down as CEO. Start with the news—Buffett’s departure—and provide concise context on the company’s recent performance, such as the 12% stock drop and break below the 200-day moving average, emphasizing why this matters. Avoid overloading readers with historical or ancillary details; instead, prioritize clarity around investor sentiment shifts tied to leadership change, Berkshire's size challenges, and its contrast with the current growth-driven market. Wrap up by summarizing the long-term stability of Berkshire’s assets and the strategic implications for its future.

Berkshire Slumps 12% as Buffett Steps Back

• Buffett’s May 3 departure coincides with a 12% stock drop.
• Berkshire trails the S&P by record margin YTD.

On May 3, 2025, Bloomberg reported Warren Buffett’s decision to step down as CEO of Berkshire Hathaway by the year’s end, sending the company’s B shares tumbling 12%—their largest single-move decline in over a year. This sharp drop has put Berkshire Hathaway’s year-to-date performance behind that of the S&P 500, marking a stark turning point for the conglomerate long hailed for its market dominance.

Buffett, who will remain as Chairman, confirmed that Vice Chairman Greg Abel will take the helm as CEO, signaling a leadership transition that has unsettled investors. Since the announcement, Berkshire B shares have slumped below their 200-day moving average for the first time in more than 570 trading days, with their 2025 year-to-date gain slowing to 4.5%, compared to the S&P 500's 7%. The market reaction underscores concerns about Berkshire’s ability to sustain its historical outperformance in the absence of the iconic “Oracle of Omaha.”

Three factors are driving this downturn. First, Buffett’s retirement symbolizes the end of an era, raising doubts about whether the company can maintain his level of strategic acumen in the future. Despite Buffett’s vote of confidence in Abel, investors remain skeptical about the shift in leadership. Second, Berkshire’s $347.7 billion in cash reserves—reported during Q1 2025—poses a deployment challenge in today’s dynamic investment landscape. Buffett has previously acknowledged that Berkshire’s sheer size limits its capacity to deliver outsized returns. Finally, the company’s value-driven portfolio is increasingly at odds with a market that prioritizes high-growth sectors such as technology and cryptocurrency. Buffett’s intentional distancing from crypto investments further highlights this dissonance, leaving Berkshire less appealing to investors chasing rapid gains.

Even so, Berkshire's formidable strengths persist. Its Coca-Cola investment produces $816 million in annual dividends, or roughly $2.2 million per day, showcasing the enduring value of its legacy holdings. However, as market dynamics gravitate toward disruptive innovation, Berkshire’s stability risks being perceived as outdated rather than a source of resilience.

In contrast, other sectors continue to thrive. As of May 20, 2025, Bitcoin (BTC) is trading at $38,432, reflecting a 1.8% increase in 24-hour trading volume. Ethereum (ETH) has also seen growth, priced at $2,195 with a 2.0% 24-hour increase, according to CoinMarketCap. These figures spotlight the divergence between traditional investment strategies like Berkshire’s and the surging interest in technology-driven assets.

In summary, the market’s reaction to Buffett’s exit reflects broader uncertainties about whether Berkshire Hathaway can adapt to the demands of a rapidly evolving financial landscape. While Buffett leaves behind an unparalleled legacy of value-based investment, the conservative strategies that defined his era face mounting challenges as Greg Abel steps into the role of CEO. For now, investors remain cautious, waiting to see if the conglomerate can reinvent itself in an age driven more by innovation than tradition.