Warren Buffett’s Berkshire Hathaway Narrows Gap with S&P 500
Last week, Berkshire Hathaway closed nearly two-thirds of its performance gap with the S&P 500, gaining 4.5%. This rise followed a robust third-quarter earnings report and contrasted with a 3% drop in the Nasdaq, marking its largest weekly decline since April.
Strong Quarterly Results
Berkshire Hathaway’s operating income increased by 34% in Q3, reaching almost $13.5 billion. The boost was largely driven by a remarkable 200% jump in profits from insurance underwriting.
Market Reaction and Strategy
Investors shifted away from AI-related stocks toward companies with solid profits, favoring Berkshire Hathaway. Despite the encouraging earnings, Warren Buffett refrained from authorizing stock buybacks, indicating he still does not view Berkshire’s shares as undervalued.
Portfolio Adjustments
- Berkshire Hathaway reduced holdings in Apple and Bank of America.
- Warren Buffett may deliver a farewell message on November 10.
"The rally in Berkshire’s stocks cut its underperformance versus the S&P 500 to 4.3 percentage points from 12.2 points as of October 29."
"Warren didn’t greenlight any stock buybacks, meaning he still doesn’t see Berkshire Hathaway shares as cheap, even after months of trading well below their May highs."
The resurgence highlights investors’ preference for companies with tangible earnings amid concerns about overpriced AI stocks and broader market uncertainties.
Author's Summary
Berkshire Hathaway’s recent strong earnings and cautious investor sentiment helped it regain ground on the S&P 500, reflecting a shift away from speculative AI stocks toward solid fundamentals.