Some moments in investing feel heavier than others.
We’re now counting down the final trading days of 2025, and for the first time in a very long while, Berkshire Hathaway is on pace to finish the year noticeably behind the S&P 500. As I write this in early December, the scoreboard reads roughly +11.3% for Berkshire Class B shares versus +18.2% for the S&P 500 with dividends reinvested. That’s almost a seven-percentage-point gap—the widest underperformance in years.
It matters because this isn’t just any year. It’s Warren Buffett’s last full year as CEO. In May he shocked the world by announcing he’ll hand the reins to Greg Abel on December 31st. So the question hanging in the air feels almost personal: is the greatest investing track record of all time quietly coming to a close?
A Rollercoaster Year for Berkshire Shareholders
Let’s rewind the tape a little.
Back in early May, right before Buffett dropped his succession bombshell at the annual meeting, Berkshire was actually crushing it—up more than 22 percentage points ahead of the S&P 500 year-to-date. Investors were feeling pretty smug.
Then reality hit.
Over the next three months, BRK.B dropped almost 15%, bottoming out near $459 in early August. The broader market wobbled too, but the S&P recovered with ferocious speed. Berkshire… didn’t. Even after a respectable 10% bounce since August, it still hasn’t closed the gap.
At its worst moment in late October, Berkshire was trailing by a staggering 12 percentage points. It briefly narrowed to less than one point in November, teasing us with the possibility of another comeback, only to fall back again.
Now, with only 17 trading days left, the math is brutal. Berkshire would need a miracle—or a serious market pullback—to avoid posting its weakest relative performance in decades.
Why Value Stocks Have Struggled in 2025
Part of the story is simple: 2025 has been another banner year for the “Magnificent Seven” tech giants and anything touched by the AI boom. Growth has dominated value by a country mile, and Berkshire Hathaway remains the ultimate value-investing conglomerate.
Apple, still Berkshire’s largest single holding at roughly 25-30% of the equity portfolio (down from 50% a few years ago), is up “only” about 15% this year—respectable, but nothing compared to Nvidia or the broader tech indices. Meanwhile many of Berkshire’s older-economy stalwarts—think banks, consumer staples, and energy—have moved sideways or worse.
- Financials have faced rising interest-rate uncertainty
- Energy stocks got crushed when oil dipped below $70 for a stretch
- Even Berkshire’s railroad and utility businesses have seen margin pressure
Add in the fact that Berkshire is sitting on a record $325 billion-plus cash pile earning around 4-5% in T-bills, and you can see why the overall return profile looks sleepy next to a red-hot market.
The Cash Mountain Everyone Loves to Hate
Speaking of that cash hoard—boy, has it become a lightning rod.
Critics point out that $325 billion earning 5% generates about $16 billion in annual interest—nice, but it’s dead money compared to owning businesses compounding at 15-20%. Buffett himself has repeatedly said he won’t invest at “silly” prices, and apparently 2025 valuations still look silly to him.
“We simply can’t find anything close to the size we need at prices that make sense.”
– Paraphrased from Buffett’s recent comments
Fair enough. But when the S&P 500 is up 18% and your cash earns 5%, that opportunity cost hurts. I’ve always admired Buffett’s discipline, yet I’ll admit there are moments lately when even I wonder if the pendulum has swung too far toward caution.
What About the Japanese Trading Houses?
One bright spot has been Berkshire’s stakes in the big five Japanese trading companies—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Bought at rock-bottom prices starting in 2020, these positions have more than doubled in yen terms and benefited from a weaker yen earlier in the period.
Buffett has been adding steadily, issuing yen bonds at near-zero rates to finance the purchases—classic Buffett arbitrage. Unfortunately the yen has strengthened sharply in the second half of 2025, erasing some currency gains. Still, on an all-in basis these stakes have been among the best performers in the portfolio.
It’s a reminder that even at 95, the man can still spot an elephant-sized bargain halfway around the world.
Greg Abel’s Inheritance: Blessing or Burden?
Come January 1st, Greg Abel takes the CEO chair while Buffett remains chairman and continues managing the majority of the portfolio (at least for now). The handoff has been telegraphed for years, and Abel has impressed almost everyone who’s watched him run the non-insurance operations.
But he’s inheriting a tougher hand than Buffett faced in decades past:
- Valuations near all-time highs
- A $325 billion cash pile he didn’t create
- The long shadow of history’s greatest investor
- A stock that already trades at a premium to many peers
Some observers think Abel may be more willing to deploy capital aggressively—perhaps through larger acquisitions or even a transformative deal. Others expect seamless continuity. Either way, 2026 will be fascinating.
Does Any of This Actually Matter?
Here’s where I always circle back when I get too wrapped up in one-year scorecards.
Warren Buffett has said a thousand times that Berkshire’s goal is to outperform in down markets and merely participate in up markets. Over rolling ten-year periods he has crushed that mandate. Over single calendar years? Sometimes yes, sometimes no.
Since 1965, Berkshire’s compounded annual gain is about 20%, roughly double the S&P 500’s 10% with dividends. That means money invested with Buffett the year I was born has grown roughly 4,000 times larger (no typos). A $10,000 investment in the S&P would be worth “only” about $300,000 over the same stretch.
One lagging year—especially one dominated by AI euphoria—doesn’t rewrite half a century of compounding magic.
“Our favorite holding period is forever.”
– Warren Buffett
Still, symbolism matters. And there’s something bittersweet about watching the Oracle’s final lap produce one of his rare underperformances. It feels a little like watching Tom Brady throw two interceptions in his last regular-season game—humanizing, maybe even fitting.
Whatever happens in the next few weeks, the Berkshire story is far from over. The culture is intact, the balance sheet is a fortress, and the incoming CEO has spent two decades preparing for this moment.
But yeah… it would be pretty cool if the old man could sneak in one last vintage Buffett fourth-quarter rally and go out on top.
Here’s to hoping.
