Berkshire Hathaway-A

Reports emerged on Oct. 14, 2026, that since the start of the third quarter Berkshire Hathaway has acquired as much as $930 million worth of stock in Bending Spoons, an Italian-based quasi-private equity firm that acquires and restructures technology products, software applications, and brands.

Why it matters: Since Greg Abel took over in January, Berkshire has made an additional $25 billion-$30 billion investment in Alphabet and a nearly $1 billion investment in Bending Spoons, while also acquiring homebuilder Taylor Morrison for $8.5 billion and adding more than $1.8 billion to its stake in homebuilder Lennar. These are about as disparate a set of investments as can be found. Bending Spoons has reported that Berkshire recently purchased another $330 million of its common stock in a private placement. This purchase, along with the $600 million that Berkshire invested in the firm during its initial public offering in July 2026, brings the insurer's cost basis to $930 million and gives it a 4% stake in the firm. Berkshire is sitting on a nearly 80% gain on its investment in Bending Spoon as of Oct. 15, after the shares rose in the days following the announcement of Berkshire's additional stake.

The bottom line: While some may question this investment (as well as the substantial investment in Alphabet), noting Berkshire's historical preference for value investments like Taylor Morrison and Lennar, we think it is a sign that the firm is finally moving out of its comfort zone to find places to put capital to work, which should be viewed as a positive for long-term investors. Berkshire's stock investment portfolio was worth close to $345 billion at the end of the second quarter and remains a meaningful contributor to the overall value of the firm. We expect to keep our $765,000 ($510) per Class A (B) share fair value estimate for narrow-moat Berkshire Hathaway in place following this news. We view the company's shares as fairly valued to slightly overvalued right now.

Over the years, we've come to believe that Berkshire (when Warren Buffett was running the show) generally pursued deals and investments that could provide the firm with 10%-12% annual returns over time, noting that the firm would be willing to settle for less in utilities (where allowed return on equity runs in a 9%-11% range) or where the insurer could secure preferred stock (given their qualified dividend tax status) as well as warrants as part of a private placement purchase of the common stock of a troubled, but profitable company that was looking for the Buffett Seal of Approval. 

We expect this is still the case with Abel at the helm and that Buffett's long-standing criteria for purchases is likely to still be followed—albeit perhaps with a few tweaks. Historically, when making investments (whether they be stock purchases or acquisitions) Buffett looked for companies running simple businesses that were large enough for Berkshire to make a meaningful investment, demonstrated consistent earning power historically, and were generating adequate returns on equity while employing little or no debt. 

The target companies also had to have good management in place, have some sort of durable competitive advantage, and be reasonably priced. Buffett also preferred to stick with industries and business models that he felt he understood and believed that he could evaluate without jumping through too many hoops. On top of that, Buffett never renegotiated after making an offer and eschewed hostile takeovers. 

Unfortunately, and especially since the global financial crisis, investments meeting Buffett's criteria have been few and far between, especially with a ton of private capital out in the market chasing deals that might have been of interest to Berkshire. We always felt that Berkshire after Buffett would need to be willing to tweak, or at least bend, some of these criteria to get deals done. 

Taylor Morrison and Lennar look like more traditional Berkshire investments—unless, of course, the company pushes to take over Lennar from an unwilling seller in the Miller family, which controls a major portion of the company's voting shares. Alphabet and Bending Spoons, though, are outside of the box, running contrary to Buffett's stance that "if there's lots of technology, we won't understand it" when historically avoiding investments in technology firms. 

While some have likened Bending Spoons to Berkshire, in the sense that the technology firm's strategy involves buying restructures technology products, software applications, and brands with the intent of holding them forever. The similarities stop there, in our view, as Berkshire generally looks for polished, successful firms where it does not need to do a lot of restructuring or make huge additional capital investments.

Bending Spoon, on the other hand, prides itself on its ability to restructure, transform, and optimize the technology products, software applications, and brands that it acquires. It acts more like a private equity firm without the monetizations as a primary end goal. The company's main businesses include Airtable, AOL, Brightcove, Eventbrite, Evernote, Tractive, Vimeo, and WeTransfer. 

Whatever it is, Berkshire and Abel have already committed $930 million to the firm's investments in Bending Spoon and are currently sitting on a nearly $725 million gain. While it is likely that Berkshire is in the name for the long run, we suspect this may be more of a situation where the company identified a decent growth opportunity and took a chance on it, with the intention being to eventually monetize its investment. That said, just as the stock soared in the past two days—up more than 40% since Berkshire's stake was announced—it could fall hard when news that Berkshire is selling hits the market if/when it chooses to do so.

For more details on our current thinking and key concerns about Berkshire Hathaway, please see our special report, "Berkshire Hathaway Enters a New Era With Greg Abel at the Helm," published on May 1, 2026. And for a more detailed look at the firm's stock investment portfolio, please see our special report, "Abel Puts His Imprint on Berkshire's Stock Portfolio," published on June 5, 2026.

Our fair value estimate for Berkshire Hathaway is $765,000 per Class A share, which is equivalent to 1.45 and 1.35 times our estimates for Berkshire's book value per share, respectively, at the end of 2026 and 2027. For some perspective, during the past five (10) years, the shares have traded at an average of 1.51 (1.45) times trailing calendar year-end book value per share. We use a 9.0% cost of equity in our valuation and assume that Berkshire, at the very least, pays the 15% corporate alternative minimum tax on adjusted financial statement income.

Our fair value estimate is derived using a sum-of-the-parts methodology, valuing each of Berkshire's four operating segments separately and adding them back together for our firmwide estimate.

Our valuation for Berkshire's insurance operations, which includes our valuation for the insurance investment portfolio, is $369,100 per Class A share, which assumes the business generates overall earned premium growth of 4.2% on average annually during 2026-30, compared with 7.0% (8.0%) average annual growth during 2021-25 (2016-25). We expect the insurance operations to post an average annual combined ratio of 97.6% during 2026-30, compared with 93.3% (96.2%) during 2021-25 (2016-25).

Our valuation of Berkshire's railroad operations is $95,300 per Class A share, with our forecast assuming carload volumes increase at a 1.7% CAGR during 2026-30, compared with 0.3% (negative 0.6%) during 2021-25 (2016-25). With average revenue per car/unit expected to increase 3.7% annually on average during the next five years, we have freight revenue expanding 5.4% on average annually during 2026-30, compared with 2.9% (negative 0.8%) during 2021-25 (2016-25). We expect BNSF's operating ratio to reach 60.1% at the end of 2030, putting it more on par with its historical differential with Union Pacific.

Our fair value estimate for Berkshire's utilities/energy division is $57,100 per Class A share. Our valuation of BHE represents a slight premium to forecast EV/EBITDA multiples for most other large regional regulated utilities. Our forecast assumes continued constructive rate case outcomes, with adjusted EBITDA for the firm's regulated US utilities expanding 4%-6% annually on average during 2026-30. We also include ongoing annual charges for West Coast wildfire litigation in our valuation.

As for Berkshire's manufacturing, service, and retail operations, we've valued these businesses at $243,500 per Class A share. We assume average annual revenue growth of 4.7% during 2026-30, relative to 8.6% (7.6%) during 2021-25 (2016-25). We also expect the division to produce pretax operating margins of 8.5% on average annually over the next five years, compared with 8.6% (8.5%) on average annually during 2021-25 (2016-25).

Our bull-case fair value estimate of $956,250 per Class A share assumes Berkshire's insurance segment premium growth and underwriting profits, as well as returns for its investment portfolio, come in higher than our expectations. We also assume stronger economic growth, with Berkshire's two noninsurance segments—manufacturing, service, and retailing and railroad, utilities, and energy—benefiting. We also expect Berkshire to put more capital to work in acquisitions and other investments than in our base case.

Our downside case fair value estimate of $612,000 per Class A share assumes Berkshire's insurance segment does not perform as well as we project in our base case, with Geico continuing its downward trajectory, and softer pricing in the property and casualty market affecting results for both BHRG and BHPG. We also assume growth at Berkshire's two main noninsurance segments stalls, with faltering economic growth torpedoing the firm's more economically sensitive operations.

Berkshire's insurance operations—Geico, Berkshire Hathaway Reinsurance Group, and Berkshire Hathaway Primary Group—remain important contributors to the overall business. Not only are they expected to account for 45% of Berkshire's pretax earnings on average during the next five years (and 48% of our firmwide valuation), but they are overcapitalized (maintaining a larger-than-normal equity investment portfolio for a property and casualty insurer).

They also generate low-cost float, which is the temporary cash holdings that arise from premiums being collected in advance of future claims. This allows Berkshire to generate returns on these funds with assets that are commensurate with the duration of the business being underwritten. That said, we don't believe the insurance industry is particularly conducive to the development of maintainable competitive advantages.

While there are some high-quality firms in the industry (with Berkshire having some of the best operators in the segments where it competes, hence the narrow economic moat around its insurance operations), the product that insurers sell is basically a commodity, with excess returns difficult to achieve on a consistent basis.

Buyers of insurance are not inclined to pay a premium for brands, and the products themselves are easily replicable. Competition among insurance firms is fierce, and participants have been known to slash prices or undercut competitors to gain market share. Insurance is also one of the few industries where the cost of goods sold (signified by claims) may not be known for years, providing an incentive for companies to sacrifice long-term profitability in favor of near-term growth.

Insurers can develop durable cost advantages by either focusing on less commodified areas of the market or developing efficient and/or scalable distribution platforms. What they can't do is develop a competitive advantage through investing. We believe insurers that consistently achieve positive underwriting profitability are better bets in the long run, as insurance profitability tends to be more durable than investment gains.

Of the more than 75 noninsurance businesses that make up Berkshire's remaining businesses, Burlington Northern Santa Fe and Berkshire Hathaway Energy are lumped together in the railroad, utilities, and energy segment. While their contribution to pretax earnings and our own fair value estimate for the firm is now overshadowed by the manufacturing, service, and retailing segment, they are far more transparent than the company's other operating segments. On a combined basis, BNSF and BHE are expected to generate 22% of Berkshire's pretax earnings on average during the next five years and contribute 20% to our firmwide fair value estimate.

With BNSF, Berkshire has a Class I railroad operator—an industry designation for a large operator with an extensive system of interconnected rails, yards, terminals, and expansive fleets of motive power and rolling stock. We believe that all the major North American Class I railroads benefit from colossal barriers to entry due to their established, practically impossible-to-replicate networks of rights of way and continuously welded steel rail. While barges, ships, aircraft, and trucks also haul freight, railroads are by far the lowest-cost option when no waterway connects the origin and destination, especially for freight with low value per unit weight.

Customers also have few choices and thus wield limited buyer power, with most Class I railroads operating as duopolies (and some being a monopoly supplier) to end clients in many markets. This provides the major North American Class I railroads with efficient scale. Believing that operators like BNSF will continue to leverage their competitive advantages of low cost and efficient scale to generate returns on invested capital in excess of the firm's cost of capital, we have awarded them wide moat ratings.

We think Berkshire Hathaway Energy is endowed with a narrow economic moat. While the unit has picked up pipeline assets over the years, which have wide-moat characteristics, most of its revenue, profitability, and ongoing capital investment is driven by its three main US-regulated utilities: MidAmerican Energy, PacifiCorp, and NV Energy. We do not believe regulated utilities can establish more than a narrow economic moat, even with their difficult-to-replicate networks of power generation, transmission, and distribution. This is because their rates and returns are set by state and federal regulators.

As for Berkshire's manufacturing, service, and retailing operations, they are expected to account for 33% of pretax earnings on average annually for the next five years (and 32% of our estimate of the company's fair value). Given the lack of transparency into these operations, getting a handle on the profitability and economic moats of the wide array of businesses in the segment is difficult at best. But given Berkshire's penchant for acquiring companies with consistent earnings power, generating above-average returns on capital, holding little debt, and run by solid management teams, we believe many of the businesses in the segment are endowed with narrow economic moats.

Berkshire's record of finding ways to invest the excess cash provided by its operating subsidiaries in projects that have, on average, earned more than its cost of capital has gotten thinner over the years. The firm has not only been fighting with the sheer size and scale of its operations, which have required larger and larger investments to be meaningful but has had to contend with a growing cache of private capital chasing deals that might have been attractive to Berkshire. That's not to say that the firm won't be able to put money to work in value-creating projects in the future, but the huge and growing sums of capital the firm must invest will ultimately limit its ability to generate outsize returns.

Book value per share, which is a good proxy for measuring changes in Berkshire's intrinsic value, increased at an estimated 18.1% CAGR during 1965-2025, compared with a 10.5% annualized return for the S&P 500 TR index.

Berkshire's stock performance has generally been solid, increasing at a 16.8% (14.3%) CAGR during 2021-25 (2016-25), compared with a 14.4% (14.8%) average annual return for the S&P 500 TR index.

At the end of June 2026, Berkshire had $177.5 billion in insurance float. The cost of the firm's float has generally been negative during much of the past two decades.

Given its size, Berkshire's biggest hurdle continues to be its ability to consistently find deals that not only add value but are large enough to be meaningful.

Another big issue that the firm will now have to face is life after the departure of Warren Buffett, who resigned as executive chair in September 2026.

We believe CEO Greg Abel will be held to a different standard than Buffett ever was—primarily because he will be serving as both an operator (which Buffett was never really all that interested in) and an investor (something Abel has had little experience with) in his new role.