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Warren Buffett, chair and former CEO of Berkshire Hathaway, announced Sept. 18, 2026, that he would step back from a more active role in the firm, and that his son, Howard Buffett, would be named the new chair of the company's board of directors.

Why it matters: Since retiring as CEO at the end of 2025, Buffett has remained active in Berkshire's investments, as well as being a sounding board for his successor, Greg Abel. We don't expect much to change as Buffett moves into his new role as chairman emeritus while continuing to serve as a board director. In a side letter to shareholders, Buffett noted that he recently celebrated his 96th birthday and that while “Father Time has been generous with me," he always wins. Buffett said he believes the company is in excellent hands with Abel and looks forward to remaining a shareholder alongside the rest of Berkshire's investors. Buffett also noted that his expectations for Abel have been high from the start, but that he has exceeded those expectations, making most of the decisions that matter for some time now. That said, we still feel Abel has focused more on highlighting what has made Berkshire successful and maintaining the status quo than on pushing forward with efforts to address the company's deficiencies and improve returns—two things on which shareholders will measure him in the long run.

The bottom line: We could be wrong, and Abel could be doing many of the things we think he needs to do to succeed in his role over the long term. Increased investments in stocks and a return to acquisitions and share repurchases more recently are all moves in the right direction but have done little to restrain the firm's growing cash balances. We are leaving our $765,000 ($510) per Class A (B) share fair value estimate for narrow-moat Berkshire Hathaway in place. We view the shares as fairly valued. That said, the lack of a major selloff is a net positive.

Over much of the past 60-plus years, Berkshire has defied the critics who said it was too big and too saddled with old-economy companies to outearn its cost of capital, with the firm expanding its book value per share at an 18.1% compound annual growth rate during 1965-2025 compared with a 10.5% average annual increase for the S&P 500 TR index. The company's Class A shares also increased 19.8% annually on average during that same period (noting that the Class B shares have only existed as an option for shareholders since May 1996).

That said, much of Berkshire's outperformance relative to the benchmark index came in the 40-plus years leading up to the 2008-09 financial crisis, as growth of the firm's book value per share has trailed the S&P 500 by around 330 basis points annually the past 15 years, and 130 basis points annually the past 20 years, while the company's shares underperformed by a slightly less amount each year on average (180 and 70 basis points, respectively, during 2011-25 and 2006-25).

The key to Berkshire's success over the years was, with the help of longtime confidant Charlie Munger (Berkshire's vice chair for many years), Buffett's ability to not only find lucrative ways to put the firm's excess capital to work but also to pay close attention to culture and fit when acquiring businesses. That said, none of what Berkshire is today would have been possible had Munger not been able to transform Buffett from a “cigar butt” investor into one focused on buying and holding quality companies for the long run.

Buffett noted as much when he eulogized Munger in Berkshire's 2023 annual report, noting that "[in] reality, Charlie was the 'architect' of the present Berkshire, and I acted as the 'general contractor' to carry out the day-by-day construction of his vision.” This led the two men to build a conglomerate with a completely decentralized business model, broad business diversification, high cash-generation capabilities, and unmatched balance sheet strength.

We long believed that the groundwork for a successful transition in Berkshire's leadership was in the works for decades, but could not have imagined how sudden, and yet fluid, these changes have been. Buffett surprised everyone (including Greg Abel) when he announced he was stepping down as CEO in May of 2025, but investors took it in stride, believing that the oracle of Omaha would still be around to guide Abel through the transition.

While we suspect that Buffett's Sept. 18 announcement may have also come as a shock to some investors, it was eventual and, in our view, far better for the company than a sudden and more permanent departure from the scene, which we've always felt would have a more adverse effect on the company's shares. Buffett has been slowly stepping away from his duties for some time now, and we only caught up to those steps when he made announcements like the one he made today, noting that he was retiring as chair of the company's board of directors.

Even with both Buffett and Munger no longer on the scene, we believe that Berkshire's culture of management autonomy and entrepreneurship is basically becoming institutionalized. This should be a net positive for Abel, allowing him to make changes where he thinks they will add value and leave things be where nothing needs to be done.

Abel is, however, working with a slightly different opportunity set than Buffett and Munger had for most of the years they ran the firm, and will have to, in our view, deal with the inevitable evolution of Berkshire from what had historically been a firm focused on reinvestment that would generate excess returns into one more focused on returning capital to shareholders.

This is what we would expect of a company of Berkshire's size with limited investment opportunities, which has been evident over the past decade or so as the firm has struggled to find effective ways to put meaningful amounts of capital to work, which has allowed substantial amounts of cash to build up on the balance sheet. With short-term rates (even though they are elevated) below Berkshire's cost of capital, and the company investing most of its cash in US Treasury bills, this will continue to drag on annual returns.

For more details on our current thinking and key concerns about Berkshire Hathaway, please see our recent special report, “Berkshire Hathaway Enters a New Era With Greg Abel at the Helm,” published on May 1, 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.