Berkshire Hathaway Stock Is Trailing the S&P 500 by About 10 Points This Year. History Says That Usually Doesn't Last.

Berkshire Hathaway B shares are up roughly 2% in 2026 versus an 11% gain for the S&P 500, leaving the company about 10 percentage points behind the index. The article argues the underperformance may create a more attractive entry point, citing approximately $48 billion of trailing-four-quarter operating earnings, a $1.1 trillion market value, and $365 billion of cash and Treasury bills. Under new CEO Greg Abel, Berkshire has deployed capital through the $9.4 billion OxyChem acquisition, a $6.8 billion Taylor Morrison deal, and $4.5 billion of Q2 share repurchases, while first-half operating earnings rose 17% to $24.3 billion, or about 6% excluding currency-related debt effects.

Analysis

The investable issue is not mean reversion versus the S&P; it is whether Greg Abel can improve Berkshire’s capital-allocation velocity without sacrificing underwriting discipline or buying at cycle peaks. The recent deployment pace is too small to materially alter per-share intrinsic value on its own, and the operating-growth figure is flattered by a non-recurring currency item. At the current valuation, a sustained rerating requires either higher normalized operating growth, materially larger repurchases, or a transaction large enough to absorb excess liquidity at an attractive return.

The OxyChem purchase creates a less obvious cyclicality risk: Berkshire is adding exposure to chemical spreads and industrial demand while its existing BNSF, Berkshire Hathaway Energy, and manufacturing units are already economically sensitive. This can be accretive through a downturn if acquired below replacement value, but it reduces the portfolio’s perceived defensiveness and could pressure the conglomerate premium if North American industrial activity weakens over the next 6-18 months. TMHC is a cleaner near-term beneficiary of Berkshire ownership through lower perceived funding risk and potentially stronger land-banking capacity, though the value transferred to TMHC shareholders depends on acquisition terms rather than future operating upside.

Consensus may be over-crediting cash as a free call option. Treasury income supports earnings today, but a falling-rate cycle lowers that contribution while the cash balance earns below Berkshire’s historic underwriting-and-acquisition return threshold. Conversely, the market may underappreciate the strategic value of permanent capital if credit spreads widen: a recession or financing dislocation is the catalyst that converts idle cash from a valuation drag into a source of high-return deals. The key 1-3 month watch items are buyback run-rate, insurance float growth, and normalized operating earnings excluding currency effects; the 6-18 month catalyst is a sizable, countercyclical acquisition.

BRK is a lower-beta relative-value vehicle rather than an obvious standalone alpha long after a broad equity rally. A failure to sustain mid-single-digit normalized operating growth, a decline in insurance underwriting profitability, or buybacks stopping while the stock remains near current levels would weaken the case. The historical post-underperformance pattern is not statistically robust enough to underwrite a directional position by itself.

Key Decisions for Investors

• Initiate a modest long BRK.B / short SPY beta-neutral pair only after confirmation that quarterly repurchases remain above a $4B annualized pace and normalized operating earnings grow at least 5% year over year; target 5-8% relative outperformance over 6-12 months, with exit if the pair underperforms by 7% or underwriting margins deteriorate.
• Do not chase TMHC on the Berkshire association alone. Treat transaction completion, consideration, and regulatory timetable as the relevant catalysts; once terms are verified, assess any deal-spread long versus merger-arbitrage risk rather than a fundamental housing long.
• Set an alert for a sharp widening in US high-yield spreads or a meaningful equity-market drawdown. That environment is the highest-conviction catalyst for long BRK.B versus SPY because Berkshire’s liquidity becomes competitively scarce; absent dislocation, excess cash remains a carry asset rather than a compounding engine.
• At the next Berkshire report, isolate currency gains from operating earnings and monitor BNSF/energy/industrial segment trends. A normalized earnings miss or a declining cash deployment rate should be used to avoid or reduce the relative-value long, even if the shares continue to lag the index.