Berkshire Hathaway Stock Rallied Last Month But Don’t Expect Fireworks in H2

Berkshire Hathaway (BRK.B) stock is up just 0.78% for the year and is underperforming the S&P 500 Index ($SPX) by a wide margin. However, the stock gained 3.78% over the last month, which not only helped it turn positive for the year but also helped it bridge its gap with the index. With Berkshire jumping sharply over the last month, let’s examine the stock's outlook in the back half of the year.

Berkshire Has Underperformed Since Buffett Announced His Retirement 

Berkshire stock hit its record high a day before Buffett announced his retirement at last year’s annual shareholder meeting. There was always a “Warren Buffett premium” built into Berkshire shares, and after the nonagenarian announced that he would step down as CEO, that premium began to wither.

The fall wasn’t really surprising since it’s tough to fill the void left by Buffett, who would go down in history as among the wisest investors of all time. Markets’ obsession with artificial intelligence (AI) is another reason behind Berkshire’s underperformance, as it has been the predominant investing theme. Investors have moved funds from other stocks towards AI names. Notably, Berkshire's underperformance is not limited to 2026 alone, and its return trails that of the S&P 500 Index by more than 20 percentage points over the last three years, which is broadly the timeframe in which AI has been the buzzword among investors.

Why Berkshire Stock Can Outperform in H2

Meanwhile, I believe Berkshire stock can rise further in the back half of the year, even though the rally might not be as spectacular as what we saw over the last month.

• Abel Is Stepping into Buffett’s Shoes: CEO Greg Abel is gearing up to step into Buffett’s shoes. In Q1, his first major step was to trim publicly traded stock holdings from 42 to 29. While reports suggest that many of these stocks were bought by Todd Combs, who has since left the company, it was nonetheless a smart move as these small holdings don’t move the needle for the company. It was a sort of clean-up exercise for Abel soon after he took over. Abel is now putting the company’s burgeoning cash pile to work and is writing checks in a hurry. He is not only investing cash to acquire stakes in other companies, but in Q1, Berkshire repurchased its shares worth $235 million. While the amount is minuscule given the conglomerate’s cash pile of nearly $400 billion at the end of Q1, the pivot is noteworthy as the company did not repurchase any shares in the preceding seven quarters. Moreover, after being a net seller of stocks for a record 14 quarters – including Q1, which was the first quarter under Abel’s leadership – Berkshire should be a net buyer of stocks in Q2, considering the massive publicly disclosed purchases so far. While it remains to be seen whether Abel’s stock picks can match Buffett’s, by opening up the cash coffers, his successor has shown that he means business.
• AI Euphoria Has Subsided: The AI euphoria has subsided, and the once high-flying Magnificent Seven (MAGS) stocks have struggled in recent months. While memory and chip companies have soared this year, the trade seems to have got a bit ahead of fundamentals now. As investors look beyond AI stocks, names like Berkshire might see buying interest in the back half of the year.
• Reasonable Valuations: Berkshire’s valuations still look reasonable at a price-to-book value multiple of 1.51 times. The multiple peaked at around 1.8 times last year, and while the conglomerate’s book value has risen over the period, its share price has come down, which has pulled down the multiple. The multiples are in line with recent averages, and while they might not be exactly cheap, they don’t appear bloated yet.

Finally, since much of the rerating in Berkshire stock has already happened, don’t expect any fireworks in the back half of the year, even though I expect the stock to close the year higher than current levels.