Berkshire stock has one of the biggest gaps with the market since 1965. Should I buy it?

Berkshire Hathaway shares are experiencing one of the worst periods of underperformance against America's broad S&P 500 equity index since Warren Buffett took control of the investment holding company in 1965, Barron's writes. However, Berkshire is attractively valued relative to intrinsic value and is defensive due to its diversified earnings and huge cash position, according to analysts surveyed by the publication.

Berkshire's Class A shares have fallen more than 6% this year, to $703,275 apiece; Class B shares have sagged by a similar percentage, to $468.8. While the S&P 500 is up about 4% over the same period. The gap is even more pronounced on the year-to-date horizon, Barron's writes: Holdings quotes have fallen about 13% since peaking on Ma. 2, 2025. That was the last trading day before the annual meeting, where Warren Buffett surprised everyone by announcing that he was stepping down as Berkshire's CEO and handing over the reins to Greg Abel (while remaining chairman). Since then, the S&P 500 has gained 26%, leaving Berkshire lagging the index by nearly 40 percentage points.

However, the current price of Berkshire securities offers a good entry point for investors, notes Barron's. The publication attributes the weakness of the shares to a combination of several factors. These include the disappearance of the so-called "Buffett premium" (an effect in which a company's shares are trading above their fundamental value only because Warren Buffett is associated with it); the market's wait-and-see attitude toward Greg Abel, sluggish revenue trends, and investor doubts about whether Berkshire's new chief executive will be able to effectively distribute the company's huge cash reserves.

Hudson Value Partners investor Christopher Davis points out that investors are gravitating toward so-called HALO (Heavy Assets, Low Obsolescence - companies whose businesses are based on real physical assets and long-term economic value) stocks this year. However, amid AI concerns, market participants interested in HALOs may ignore Berkshire, notes Barron's: "Berkshire is a benchmark HALO company, given the resilience and inflation protection of its insurance business, as well as its hard-to-replicate industrial assets," he says.

In particular, in Berkshire's favor in this regard is evidenced by the fact that the investment company owns one of the two largest railroads in North America Burlington Northern Santa Fe, one of the largest electric power companies in the U.S. Berkshire Hathaway Energy, as well as many industrial enterprises, including Lubrizol (chemical industry) and Precision Castparts (production of aircraft parts). Against this backdrop, Berkshire stock at its current value is a "compressed spring," according to Davis.

And while at first glance, the projected P/E multiple (which shows the ratio of a company's current stock price to its expected net income per share) for 2026 seems inflated at 23, based on analysts' consensus estimates, after adjusting for the significant amount of cash on the company's books and low-yielding investments on the balance sheet - the real multiple drops to 17-19, Barron's writes.

Semper Augustus analyst Chris Blomstrand determines the intrinsic value of the company based on the valuation of Berkshire Class A shares at $855,000 per unit (this is 21% higher than the current quotations). A similar estimate of UBS analyst Brian Meredith is $758,000 per paper (7% higher than the current value). Nevertheless, on the horizon of the year from Berkshire class A securities Meredith expects growth by almost 20% relative to the closing level on April 23 - his target price for class A shares is $871,000.

Wall Street analysts' average target for Berkshire's Class B shares - $531.42 apiece - also suggests they are up nearly 13% from the previous close. Four experts watching the company's shares recommend to buy them (Buy and Overweight ratings), three more - advise to keep them in the portfolio; and one - to sell.

This article was AI-translated and verified by a human editor