Berkshire Hathaway, Warren Buffett's conglomerate, is trailing the broader market this year. Its recent performance relative to the S&P 500 has some analysts pointing to the possibility of a stock market bubble. The company's conservative positioning, meanwhile, could set it up to profit if a downturn materializes.
Widening gap with the index
Through the first half of 2025, Berkshire's stock has risen roughly 8%, while the S&P 500 has gained about 15%. That 7-percentage-point gap is one of the largest in recent years. The underperformance stands out because Berkshire has often been seen as a bellwether for the broader economy, with its vast holdings in insurance, railroads, utilities, and consumer goods.
For investors, the divergence raises a question: Is the market simply rewarding growth stocks over value plays, or is something more concerning at work?
What Berkshire's lag might signal
Berkshire tends to fare better when markets are calm and fundamentals drive returns. When speculative fervor pushes prices higher, the conglomerate's steady, cash-heavy approach can look dull. Historically, a prolonged stretch of Berkshire trailing the index has sometimes preceded a market correction or a shift in investor sentiment.
The company's massive cash pile — more than $150 billion at last count — is a bet on patience. Buffett and his team have repeatedly said they'll deploy that capital only when they see attractive opportunities. If the current rally is built on shaky ground, that patience could pay off handsomely.
A conservative strategy for a downturn
Berkshire's insurance operations generate float — premiums collected before claims are paid — which gives the company cheap financing. In a downturn, that float becomes a weapon: Berkshire can buy stocks and whole companies at distressed prices. The same strategy worked after the 2008 financial crisis, when Berkshire made lucrative investments in Goldman Sachs, General Electric, and Bank of America.
Right now, the company is selling stocks more than buying them. It trimmed positions in Apple and other holdings in recent quarters, adding to its cash reserves. That defensive posture suggests management sees little value in today's elevated valuations.
What comes next
Berkshire's next quarterly filing, due in mid-August, will show whether the selling continued and whether any new positions were opened. Investors will also watch for clues from Buffett's annual shareholder letter, expected early next year. For now, the gap between Berkshire and the S&P 500 keeps widening — and with it, the debate over how much longer this rally can last.
