2026 Berkshire Commentary

A Year of Transition

Berkshire Hathaway’s annual meeting this past weekend reflected a company in clear transition. Newly appointed CEO Greg Abel was lighter on folksy wisdom and notably heavier on financial and operational detail. It was a different tone, but an informative one, and likely indicative of what lies ahead for shareholders.

The meeting comes at a difficult moment for the stock. Since last year’s annual meeting, Berkshire has lagged the S&P 500 by nearly 40%, marking the largest relative performance gap between meetings in at least 40 years.

Limited exposure to the technology companies driving recent index gains explains part of the gap, but potential headwinds in Berkshire’s insurance operations also play a factor. Expectations for a more difficult underwriting environment in the coming years have weighed on sentiment for the broader insurance sector. Greg Abel and Ajit Jain underscored the potential headwinds, and their long-term focus on underwriting discipline.

Nevertheless, Berkshire’s underlying business remains resilient, generating substantial operating cash flow across its diversified portfolio. The allocation of excess capital remains the central focus, as it has been for years, with cash and equivalents exceeding $380 billion in the first quarter. Even when adjusting for Berkshire’s size today, this represents an unusually large balance.

Cash has historically been viewed as a strategic asset for Berkshire, mitigating downside and providing upside optionality during periods of market dislocation. However, in the context of strong equity market performance, that same cash is increasingly being viewed as an opportunity cost to near-term returns, in some respects, a liability.

The current market environment is not conducive for deploying capital, with few targets that meet Berkshire’s combined requirements of scale and return. Abel reiterated Berkshire’s willingness to act decisively when the price is right, but the “strike zone” continues to narrow as the company grows larger.

We were underwhelmed by the responses regarding oversight of the public securities portfolio. The departure of Todd Combs, combined with Ted Weschler’s somewhat limited role, leaves much of the portfolio under Abel’s purview. This concentration of responsibility raises reasonable questions around bandwidth and focus, particularly given his increased involvement in operating businesses. Buffett’s public markets experience was extensive and difficult to replicate. Abel’s background is more operationally oriented, and the path forward for this portion of Berkshire’s capital is less certain for it.

With large acquisition opportunities scarce, share repurchases remain the most logical use of capital. Berkshire resumed share buybacks in the first quarter, the first such activity in nearly two years, though at a modest pace. More notably, Abel outlined a more detailed framework for assessing intrinsic value in repurchase decisions, incorporating adjusted book value, mark-to-market valuations of liquid assets, and an implied valuation of operating subsidiaries. This approach is broadly consistent with how we have historically evaluated the business.

One of the more encouraging aspects of the meeting was the expanded business update, including presentations from several operating managers that offered a rare window into the depth of Berkshire’s leadership bench. The most immediate opportunity appears to lie in improving performance at BNSF and Geico, both of which continue to trail peers on key operating metrics. Buffett’s long-standing hands-off approach to subsidiary management has been effective over time, but Abel has signaled a more engaged stance. Given the scale and complexity of Berkshire’s operations today, that shift may represent the most tangible lever for near-term value creation.

From a valuation standpoint, shares appear more reasonable today than in recent years, as evidenced by the resumption of repurchases. Still, expectations should remain grounded. Long-term performance will likely be driven by underlying business execution, with Berkshire’s size acting as a natural constraint on future growth. The more compelling case for the stock in the intermediate term lies in operational improvement and a greater willingness to hold subsidiaries to higher performance standards. Abel appears oriented in that direction.

What remains to be seen is whether the growing cash pile finds a home that justifies the wait.

Authored by: Jack Holmes, Chief Investment Officer

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