Over the past 12 months, Berkshire shares have gained just under 6% less than the S&P 500.
With Warren Buffett preparing to step down as CEO at year end, investors are reassessing what Berkshire looks like in its next chapter and whether the stock offers value at today’s price.
Key Points
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Berkshire trades at reasonable levels but not at prices that signal clear undervaluation, as shown by the lack of buybacks.
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Operating earnings and insurance profits are growing, and the investment portfolio continues to compound steadily.
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Berkshire’s massive cash position offers protection now and flexibility to capitalize on future market selloffs.
How Berkshire Is Valued Today
In a market still dominated by high-multiple growth stocks, Berkshire trades at comparatively restrained levels.
The price-to-book ratio deserves special attention. While no longer an official rule, Berkshire historically viewed buybacks below 1.2 times book value as a clear signal of undervaluation.
Today’s higher multiple suggests the stock is no longer cheap by Berkshire’s own historical standards, even if it remains reasonable relative to the broader market.
Operating Results Remain a Bright Spot
Berkshire’s underlying businesses continue to deliver solid results. In the third quarter, operating earnings rose 34% year over year.
Insurance underwriting was a major contributor, with profits more than doubling to roughly $2.4 billion as pricing discipline and favorable conditions boosted results.
The equity portfolio has also held up well. Apple, Berkshire’s largest investment, has gained around 9% over the past year, closely tracking Berkshire’s overall return. While the company has trimmed some equity exposure, its long-held positions acquired at attractive prices continue to provide steady, compounding income.
What the Buyback Pause Really Signals
One of the clearest signals about valuation comes from Berkshire itself. Between 2018 and 2024, the company was an aggressive buyer of its own shares, often deploying billions when management believed the stock was undervalued.
That activity has slowed sharply since late last year. This does not imply Berkshire is overvalued, but it does suggest that Buffett and his team see fewer obvious bargains at current prices. In other words, the stock appears closer to fair value than a compelling bargain.
The Strategic Value of Berkshire’s Cash Hoard
Berkshire’s defining feature heading into its leadership transition is its massive cash position, which reached a record $381 billion in the most recent quarter. That capital provides both protection and opportunity.
In the short term, much of that cash sits in Treasury securities, generating reliable income while insulating Berkshire from market volatility. Over the long term, it gives incoming CEO Greg Abel extraordinary flexibility.
Market corrections, when they arrive, could allow Berkshire to deploy capital at scale into high-quality businesses at discounted valuations, something few companies are capable of doing.
Is Berkshire a Buy at These Levels
Berkshire does not appear meaningfully undervalued today, but it is far from expensive. The stock reflects a business that is financially strong, conservatively run, and positioned to take advantage of future dislocations rather than chase today’s market leaders.
For long-term investors, Berkshire still offers a compelling mix of stability, optionality, and disciplined capital allocation. One potential shift under Greg Abel could be a change in capital return strategy.
Buffett famously avoided dividends in favor of reinvestment and buybacks. A future dividend, while not guaranteed, could broaden Berkshire’s appeal and mark a meaningful evolution in how the company returns value to shareholders.
Berkshire Hathaway may no longer dominate short-term performance tables, but at a reasonable valuation and with unmatched financial flexibility, it remains one of the most resilient long-term compounding stories in the market.