Berkshire Hathaway: A Closer Look at Recent Challenges

The Current State of Berkshire Hathaway

Shares of Berkshire Hathaway have seen a significant decline since their peak in early May, dropping more than 12%. The company’s performance is under scrutiny as several of its businesses have not met previous expectations.

Declining Operating Profit

According to the second-quarter earnings report, Berkshire Hathaway’s operating profit fell to $11.16 billion, marking a 3.8% decrease compared to the previous year. This decline is partly due to reduced underwriting earnings in its insurance operations, which is a significant portion of its overall business.

Investment Write-Downs

Another factor contributing to Berkshire’s struggles is its investment in Kraft Heinz, which has seen a dramatic decline in value. Berkshire Hathaway recorded a pre-tax write-down of approximately $5 billion on this investment. Despite holding a 27.4% stake in Kraft Heinz, the company has faced challenges as the food giant’s shares have dropped by two-thirds since 2017.

Stock Performance Overview

As of recent trading, Berkshire’s Class A shares closed at $711,480, down $8,370 for the day, while Class B shares ended at $472.84, up 96 cents. The stock reached intraday highs of $812,855 and $542.07 on May 2, the day before the company’s annual meeting. Despite this drop, the year-to-date gains for both classes of shares were still significant at 18.5% before the decline began.

Leadership Transition and Market Impact

The announcement of Warren Buffett’s planned retirement as CEO at the end of the year has created uncertainty among investors. Buffett, known as the “Oracle of Omaha,” has been a trusted figure in the investment community for decades. His successor, Greg Abel, is less familiar to Wall Street, which may have contributed to the recent stock decline.

Market Shifts and Technology Focus

Additionally, a strong rebound in the technology sector, which began in April, might have diverted investor attention from Berkshire’s stock to more glamorous opportunities. Companies like Palantir, Meta Platforms, Microsoft, and Nvidia have attracted significant investments, further impacting Berkshire’s stock performance.

Berkshire vs. Market Trends

Despite the recent struggles, Berkshire’s Class A and B shares have shown resilience, with increases of 4.5% and 4.3% respectively in 2025, while the S&P 500 has risen by 6.1% this year. However, the company’s Form 10-Q report highlighted vulnerabilities stemming from economic conditions, geopolitical events, and tariffs that could negatively impact its operations.

Financial Strength and Cash Reserves

Berkshire Hathaway maintains a robust cash position, ending the second quarter with $344.1 billion in cash and equivalents, which represents about 37% of its total assets. This includes nearly $250 billion in short-term Treasury securities, providing the company with ample liquidity to navigate challenging market conditions.

The Legacy of Warren Buffett

Warren Buffett, who will turn 95 on August 30, took control of Berkshire Hathaway in 1965 when it was a struggling textile company. Since then, he has transformed it into one of the largest and most successful conglomerates in the world, with diverse interests ranging from insurance to railroads and food brands.

Future Challenges for Berkshire Hathaway

As Berkshire prepares for a transition in leadership, it will face growing competition in various sectors. The railroad business, for example, must contend with potential pressures from a merger between Union Pacific and Norfolk Southern, which could create the first coast-to-coast railroad operator in the United States.

Continued Investment Activity

Berkshire remains a substantial investor across multiple industries, holding a fair value of $268 billion in various companies. This diversification helps mitigate risks but also requires strategic management as market dynamics evolve.

Conclusion

While Berkshire Hathaway has faced challenges in recent months, including declining profits and investment write-downs, the company’s considerable cash reserves and diversified portfolio position it well for future opportunities. As it gears up for a new leadership chapter, investors will be closely watching how the company navigates these transitions and market shifts.