Berkshire Hathaway, known for its strategy of patient value investing, is experiencing noticeable underperformance compared to the S&P 500. As of April 2026, shares of Berkshire Hathaway lagged the S&P 500 by 11.3 percentage points for the year, reflecting a decline of about 13% since their peak in May 2025, while the S&P 500 enjoyed an increase of approximately 26% during the same timeframe.
This trend began to emerge in late 2025, when Berkshire’s returns were just 8.6% compared to the S&P 500’s impressive 15.5%, widening the gap by 6.9 percentage points. Over the 12 months ending in May 2026, Berkshire’s Class B shares generated a return between negative 4% and negative 5%. In contrast, the S&P 500 increased by about 26% to 27%.
For the entirety of 2025, Berkshire offered a return near 11%, while the S&P posted roughly 17%. Historically, since 1965, Berkshire Hathaway has only underperformed the S&P 500 in 20 full calendar years, and now 2025 adds to that list.
What led to this underperformance? One significant factor is the retirement of Warren Buffett in May 2025, a pivotal moment that ushered in Greg Abel as the new CEO. At the time of his retirement, Buffett was 94 years old. Since then, Berkshire's substantial cash reserves and short-term Treasury investments have weighed heavily on performance during a time when equities, particularly in growth sectors, have thrived.
What should investors consider moving forward? Traditionally, when Berkshire fails to keep pace with the market, it signals periods of excessive optimism in high-growth industries. Berkshire's conservative investment approach, which heavily features insurance, utilities, and cash, appears less exciting when speculative investments are booming.
If history is any guide and Berkshire's cautious strategy ultimately proves to be correct, similar to its performance during the dot-com bubble and the 2008 financial crisis, we might see a sharp decline in those high-risk assets that investors currently favor. Berkshire’s liquid cash position could become a strategic advantage when prices drop and attractive investment opportunities arise.