Buffett's Berkshire has its first "bear." Why does he advise selling the stock?

Analysts at investment bank KBW became the first on Wall Street, among those whose opinions are followed by Bloomberg, who gave a recommendation to sell shares of Berkshire Hathaway legendary investor Warren Buffett. KBW warned that the conglomerate could face a slowdown in profits and loss of investor confidence after the 95-year-old billionaire leaves the post of CEO. Among other pressures, analysts cited uncertainty over succession, falling profitability in the insurance and energy businesses, weakness in railroads and reduced tax credits for green energy.

Investment bank Keefe, Bruyette & Woods (KBW) downgraded its recommendation on Warren Buffett's Berkshire Hathaway's Class A shares from Market perform ("on par with the market") to Underperform ("below market", equivalent to a "sell" advice), Bloomberg reports. This became the only "sell" advice on Berkshire securities among the six analysts tracked by the agency. KBW also lowered its target price on the company's Class A shares from $740,000 to $700,000 - down 5% from its closing level on Friday, October 24, CNBC adds.

According to KBW analyst Mayer Shields, the situation is not in Berkshire Hathaway's favor: the company's shares continue to be pressured by macroeconomic uncertainty, the issue of Buffett's succession and weakening operating results. "We expect the securities to perform weakly amid continued earnings concerns," Shields said in a note cited by Bloomberg.

One of the key risks the analyst named Warren Buffett's departure from the post of Berkshire CEO and lack of transparency of management after the transfer of powers. On January 1, 2026, Buffett will hand over the leadership to his successor Greg Abel. The company, which is valued at about $1.2 trillion, will then remain one of the most valuable in the world, KBW said, but the effect of the "Buffett premium" - the extra value investors have placed on the stock because of the legendary investor's reputation and outstanding money management skills - may fade.

In addition, KBW expects earnings pressure in its key divisions - insurance company GEICO, reinsurance business Berkshire Hathaway Reinsurance Group, energy holding company Berkshire Hathaway Energy and railroad operator Burlington Northern Santa Fe (BNSF). The company's results could be negatively impacted by lower GEICO margins, weakening catastrophe reinsurance pricing, falling short-term interest rates and railroad duty pressure. An additional risk factor, the analyst called the gradual elimination of tax credits for renewable energy, which could also limit earnings growth in the coming year.

Shares of Berkshire Hathaway Class B at trading on Monday slipped by 1.5% to $484.5. Compared to the beginning of 2025, Berkshire securities are now 7% more expensive, while the main U.S. stock index S&P 500 has added almost 17% over the same time.

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