What's Happening?
Berkshire Hathaway, led by Warren Buffett, is experiencing a notable lag in its stock performance compared to the S&P 500. As of October 2025, Berkshire's B shares have increased by 8.6% year-to-date, while the S&P 500 has risen by 15.5%, marking a 6.9
percentage point gap, the largest this year. This underperformance is partly attributed to Berkshire's decision to significantly reduce its stake in Apple, a major component of its equity portfolio. Since the fourth quarter of 2023, Berkshire has cut its Apple holdings by 69%, from 916 million shares to 280 million shares. This decision has resulted in a substantial 'lost' profit of approximately $50 billion, as Apple's stock has surged over 50% since the sales began.
Why It's Important?
The performance gap between Berkshire Hathaway and the S&P 500 highlights the challenges and risks associated with strategic investment decisions. Berkshire's reduction in Apple shares, despite Apple's strong market performance, underscores the complexities of managing a large investment portfolio. This move has financial implications, including a significant tax impact, as Berkshire realized a pretax gain of around $96 billion but faced a $20 billion tax reduction. The decision reflects Buffett's anticipation of potential future increases in capital gains tax rates, which could affect shareholder returns. The situation also raises questions about the long-term strategy of one of the most closely watched investment firms in the world.
What's Next?
Berkshire Hathaway is expected to disclose its updated share count in mid-November, which will provide further insights into its investment strategy. Investors and analysts will be closely monitoring any additional changes in Berkshire's portfolio, particularly regarding its remaining Apple shares. The company's future performance will depend on its ability to navigate market conditions and make strategic investments that align with its long-term goals. Additionally, any changes in U.S. tax policy could influence Berkshire's investment decisions and overall financial performance.
Beyond the Headlines
Berkshire's decision to sell a significant portion of its Apple shares may have broader implications for the investment community. It highlights the importance of tax considerations in investment strategies, especially for large institutional investors. The move also reflects a cautious approach to potential regulatory changes, such as increased capital gains taxes, which could impact investment returns. This situation serves as a reminder of the dynamic nature of financial markets and the need for adaptability in investment strategies.
