Berkshire Hathaway downgraded as Buffett exit sparks rare sell call from KBW

According to a note from Keefe, Bruyette & Woods, Berkshire Hathaway just got hit with something it rarely ever sees: a sell ￰0￱ brokerage downgraded Warren Buffett’s company from neutral to underperform, saying a perfect storm of executive uncertainty and business-specific problems could hurt both earnings and stock performance in the year ￰1￱ is what happens when the man called “the greatest investor alive” and “the Oracle of Omaha” finally steps off the ￰2￱ new price target on Berkshire’s Class A shares has been cut from $740,000 to $700,000, around 5% below where it closed on Friday at $738,500. “Beyond our ongoing concerns surrounding macro uncertainty and Berkshire’s historically unique succession risk … we think the shares will underperform as earnings challenges emerge and/or persist,” wrote analyst Meyer Shields in the client note.

Warren, who has run Berkshire for way over six decades, announced in May that he’s stepping down as CEO at the end of the year. He’s ￰3￱ decision didn’t just unsettle investors; it cracked the floor. Berkshire’s stock has already dropped from all-time highs, and KBW believes part of the decline is tied to what they called the “Buffett premium,” the price investors were always willing to pay simply because Warren was the one steering the ￰4￱ him, they’re not sure who or what they’re really investing in anymore. Geico, BNSF, and energy units face performance pressure KBW said that Berkshire’s core businesses are not showing the strength they used ￰5￱ auto insurance unit Geico, the Burlington Northern Santa Fe railroad, and the massive energy segment are all facing different types of pressure, and they’re happening all at once.

It’s a mix of short-term market cycles and deeper long-term ￰6￱ the insurance side, the firm pointed to softer investment income and predicted Geico would likely post weaker ￰7￱ unit is cutting personal auto rates and pushing more money into marketing to try and take back market share it ￰8￱ believes that’s going to hit earnings ￰9￱ reinsurance division isn’t helping. A light hurricane season this year has dragged down prices in the property-catastrophe ￰10￱ means Berkshire Hathaway Reinsurance Group could see both premium volume and profits slide further over the next few ￰11￱ said the trends in insurance are “working against them right now, and not likely to ease up anytime soon.” One of Berkshire’s biggest cash cows in recent quarters has been investment income, but that too is about to take a ￰12￱ short-term interest rates move lower, returns from the company’s massive cash and ￰13￱ holdings are likely to ￰14￱ the end of June, the company’s cash pile stood at $344.1 billion, still near record highs, but those dollars aren’t going to earn what they used to.

Succession, trade, and tax policy collide across operations The railroad business isn’t looking any ￰15￱ Northern Santa Fe’s inflation-adjusted revenue has always moved with the flow of trade, especially between the ￰16￱ ￰17￱ that relationship has been rocky under the Trump ￰18￱ warned that continued tariff tensions and slower trade could keep growth on ￰19￱ Hathaway Energy, another key segment, is also running into policy ￰20￱ “One Big Beautiful Bill Act” is accelerating the wind-down of federal clean-energy tax ￰21￱ means future renewable projects will likely see lower returns, and the company’s long-term energy profits could ￰22￱ analysts noted that without those credits, the economics of new green investments simply won’t look as ￰23￱ B shares of Berkshire are still in positive territory for the year, up 8.6% as of ￰24￱ they’re trailing the S&P 500 by 6.9 percentage points, the widest lag this ￰25￱ the broader market climbs, Berkshire is falling ￰26￱ note from KBW was titled “Many Things Moving in the Wrong Direction.” It didn’t sugarcoat the concern that once Buffett exits, investor trust might follow.

“Warren Buffett’s likely unrivaled reputation and what we see as unfortunately inadequate disclosure that will probably deter investors once they can no longer rely on Mr. Buffett’s presence at Berkshire Hathaway,” Shields ￰27￱ smartest crypto minds already read our ￰28￱ in? Join them .