The cost of retirement

Since the announcement of Warren Buffett’s retirement in May last year, Berkshire Hathaway has underperformed the S&P 500 by roughly 40%. This relative weakness comes despite a succession that, in our view, is built on continuity rather than disruption. Greg Abel, now at the helm, has worked alongside Warren Buffett for more than 25 years, having joined the group in 2000, and is deeply embedded in its culture and capital allocation discipline.

The core investment case remains intact. Berkshire continues to rely on a diversified set of high-quality businesses across insurance and reinsurance, freight rail transportation, utilities, energy, finance, manufacturing, services and retail. The listed equity portfolio also remains robust and aligned with long-term value principles.

Valuation is starting to look more compelling. According to UBS, the shares are trading at around a 5% discount to intrinsic value. One factor weighing on sentiment may be the group’s very large cash position, now above $380 billion. This represents extraordinary optionality — more than twice the market capitalization of major European blue chips such as Allianz, E.ON or Deutsche Telekom. While this liquidity is a strategic asset, it also raises questions about capital deployment in an environment where attractively priced large-scale opportunities remain scarce.

In essence, the market seems to be questioning not the quality of the franchise, but the pace and visibility of future capital allocation. For long-term investors, this may be precisely the moment to revisit the case.

I wish you a nice day,

Léon

This document is provided for information and illustration purposes only and does not constitute investment advice, an offer, or a recommendation to buy or sell any financial instruments. Past performance is not indicative of future results.