Berkshire Hathaway (BRK.A -0.55%) (BRK.B -0.59%) was once an ordinary textile maker before Warren Buffett took over the company in 1965 and grew it into a massive conglomerate. Along the way, he generated truly remarkable gains for its long-term investors. Over those decades, its stock surged by just over 5,520,000% through the end of 2024, while the total returns from the benchmark S&P 500 (including reinvested dividends) were about 39,000%.

Under Buffett, Berkshire shuttered its legacy textile business and acquired cash-rich insurance, railroad, energy, and consumer staples companies, among others. It also built up a huge investment portfolio with dozens of stocks such as Coca-Cola, Apple, and American Express.

Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.

Berkshire’s scale, diversification, and shrewd investments in recession-resistant businesses have helped it consistently beat the market over the years by a wide margin. But over the past 12 months, Berkshire’s stock only rose 7% while the S&P 500 advanced 20%. So why did Berkshire lose its luster? And can it warm up again and outperform the market over the next 12 months?

What happened to Berkshire Hathaway over the past year?

In May, Buffett announced he would retire from his role as CEO by the end of this year and hand the reins over to Greg Abel, the current chairman and CEO of Berkshire Energy. That announcement wasn’t too surprising, since Buffett just turned 95 and had previously named Abel as his successor.

But the news still rattled investors and weighed down Berkshire’s stock, since it was Buffett and his longtime business partner, Charlie Munger (who passed away in 2023), who had engineered the conglomerate’s massive expansion. Buffett’s closely watched stock picks also drove the growth of its now $302 billion equity portfolio.

In addition, Ajit Jain — who has served as Berkshire’s insurance chief for nearly four decades — sold more than half of his shares in 2024 and continued to reduce his stake in 2025. Those sales suggest Jain, who turned 74 this year, could also plan to step down once Buffett retires.

This changing of the guard has curbed the market’s enthusiasm for Berkshire’s stock. Abel has been with Berkshire since 1999, but he isn’t as seasoned a stock picker as Buffett. Moreover, Buffett’s decision over the past couple of years to trim many of Berkshire’s stock positions, boost its cash and Treasury holdings to record highs, and pause its own share buybacks all suggest that he thinks the market is getting overvalued. The S&P 500 is historically expensive at 30 times earnings, so it might not make sense to buy Berkshire’s stock as Buffett backs away.

But how is Berkshire Hathaway’s core business doing?

From 2019 to 2024, Berkshire’s operating earnings (which exclude the gains and losses from its equity portfolio) increased at a robust compound annual rate of 15%. Its profits grew even as the pandemic, inflation, rising interest rates, trade wars, and geopolitical conflicts rattled the markets.

Berkshire remained resilient in part because it generates about half of its operating earnings from its insurance subsidiaries, which are better insulated from economic downturns than businesses in many other sectors. Their stable growth offset the macro headwinds that impacted its railroad, energy, manufacturing, and retail subsidiaries. Its year-end “float” — the amount of cash generated by its insurance premiums that can be deployed on investments until it’s needed to pay claims — also rose from $129 billion in 2019 to $171 billion in 2024. Berkshire plowed a lot of that cash into its sprawling stock portfolio, which now accounts for 29% of its market cap of $1.05 trillion.

What will happen to Berkshire’s stock over the next 12 months?

After Abel takes over, he will probably stick to Buffett’s longtime playbook. He’ll likely nurture the growth of its core businesses and be prudent about buying more stocks or resuming share buybacks. As Buffett famously said, investors should be “fearful when others are greedy” — and there appears to be a bit too much greed baked into the market right now.

As for Berkshire’s own stock, it trades at 22 times last year’s operating earnings. That’s not cheap, but it doesn’t seem overvalued either. If we go back to the last trading day of 2019, we’ll see that Berkshire’s stock was similarly valued at 23 times its operating earnings for that year. If you didn’t invest in Berkshire back then because you thought it looked too expensive, you missed out on a gain of 116%. So if you expect it to continue growing without Buffett at the helm, then this is still a good time to accumulate its shares.

Over the next 12 months, Berkshire’s stock could underperform the S&P 500 as investors fret over Buffett’s retirement, Jain’s potential departure, and other changes on the leadership team. But over the long term, it should catch up and outperform the market again as long as Abel doesn’t radically alter its evergreen business model.