Why did Berkshire shares fail to price in life after Warren Buffett?

Investors have spent the past year debating whether Greg Abel can live up to Warren Buffett at Berkshire Hathaway (disclosure: I own shares in Berkshire). A more puzzling question is why the market seems to have been caught off guard by the retirement of a 94-year-old.

Abel recently sought to reassure investors at Berkshire Hathaway’s first annual meeting without Buffett at the helm. As well he might. The stock has fallen 12 per cent since the 2025 meeting – its fourth-worst inter-meeting performance since at least 1985, according to Bespoke Investment.

More starkly, the S&P 500 has surged over the same period, leaving Berkshire trailing the index by over 40 percentage points over the past year.

One can suggest multiple reasons for this, not all of them Buffett-related. Elevated US stock valuations have limited Berkshire’s ability to invest, resulting in its cash pile swelling to a record $397 billion (€337 billion). Private equity firms have added to the competition for large deals. Many see Berkshire’s main business, insurance, as vulnerable to AI-driven disruption.

And while Buffett himself professes confidence in Abel, investors are entitled to ask questions. “You have someone with no professional asset management experience being charged with asset allocation and replacing one of the world’s greatest investors,” said CFRA Research’s Cathy Seifert.

Fair enough, but one must wonder why markets seemed so unprepared for the idea that Buffett, 94 last May, might call it a day.

It’s hard to argue his departure was priced in, given Berkshire traded at 1.8 times book value last May, well above its long-term average of 1.4 to 1.5. Even more strikingly, shares more than doubled between October 2022 and May 2025, hitting an intraday all-time high of $542.07 the day before Buffett’s announcement.

On the following trading day, the stock fell as low as $502.80 and was down about 15 per cent within three months. In the nine months since then, notes Bespoke Investment, they haven’t recovered any ground.

[ ‘Going quiet’ at 95, Warren Buffett shows why time beats returnsOpens in new window ]

“They say the market never rings a bell at the top, but Buffett’s announcement last year was as close as you can get,” says Bespoke. Indeed.

Markets aren’t perfectly efficient, but they are generally pretty efficient, usually pricing in events well before they happen. In this case, everyone knew Buffett was 94, but the distinction between ‘Buffett is 94’ and ‘Buffett is stepping down’ appears to have proved harder to price.