Berkshire Hathaway shares fall 5% after shocking Buffett exit and an earnings decline
Warren Buffett’s Surprise Announcement Causes Berkshire Hathaway Shares to Drop
In a surprising turn of events, Berkshire Hathaway chairman Warren Buffett announced his decision to step down during the company’s annual meeting in Omaha, Nebraska. After a remarkable 60-year run at the helm of the conglomerate, Buffett revealed that Greg Abel, vice chairman of noninsurance operations, would be taking over as CEO on January 1, 2026. Despite the unanimous approval of the board for this transition, Berkshire Hathaway’s Class A shares experienced a 4.9% drop to $769,960, following a record high of $809,350 per share. Similarly, Class B shares fell to $512.94 after reaching an all-time high of $539.80 on Friday.
While some investors may be concerned about this leadership change, others like Macrae Sykes, a portfolio manager at Gabelli Funds and a Berkshire shareholder, see it as a positive development. Sykes noted that Buffett will remain as chairman, allowing him to mentor Greg Abel and provide valuable insights when major capital allocation decisions arise. This transparent transition marks the end of an era for Berkshire Hathaway, which has transformed from a failing textile mill into a trillion-dollar conglomerate under Buffett’s guidance.
Despite the initial market reaction to Buffett’s announcement, analysts like Brian Meredith from UBS believe that the operational continuity at Berkshire Hathaway will remain intact under Abel’s leadership. The company’s strong cash flows from its diverse portfolio of businesses are expected to sustain its growth trajectory. However, Berkshire’s first-quarter results showed a 14% decline in operating earnings, primarily due to a significant drop in insurance underwriting profit caused by losses from the Southern California wildfires.
Nevertheless, Berkshire Hathaway shares have outperformed the S&P 500 this year, rising nearly 19%. Investors are attracted to Berkshire’s defensive nature, supported by its robust insurance empire and solid balance sheet. As the company transitions to new leadership, the focus remains on maintaining its core values and business strategy that have made it a powerhouse in the corporate world.
Overall, while the market may be adjusting to the news of Buffett stepping down, Berkshire Hathaway’s long-term prospects continue to look promising. With a new CEO at the helm and Buffett’s continued involvement as chairman, the company is well-positioned to navigate the challenges and opportunities that lie ahead.
