Following Buffett's lead, Abel's first shareholder letter failed to boost market confidence, and Berkshire(BRK.A.US, BRK.B.US) stock prices remain under pressure

Berkshire Hathaway (BRK.A.US, BRK.B.US) announced its Q4 earnings and the letter to shareholders from new CEO Abel. Following the release, the stock price dropped sharply on Monday, with the market reacting tepidly. Class A shares fell about 4.9% to $720,000, and Class B shares declined 4.91% to $480.17.

The financial report showed that the company’s operating profit in Q4 decreased by 30% year-over-year. Even after excluding one-time factors such as currency fluctuations and certain goodwill impairments, adjusted operating profit still declined nearly 20%. Notably, underwriting profit in insurance dropped over 50% YoY, and the company indicated that its core property and casualty insurance business environment is becoming more challenging.

Affected by the results, KBW analyst Meyer Shields lowered earnings forecasts for 2026 and 2027 to $30,610 and $32,290 per Class A share, respectively, representing reductions of about 5% and 4% from previous estimates. The firm maintained a “market laggard” rating and a target price of $695,000.

Although Abel openly discussed the company’s main operations in the shareholder letter and pledged to continue the corporate culture built by Buffett over the past 60 years, gaining some long-term investors’ approval, the company’s capital allocation policy remained unchanged. Since May 2024, Berkshire has not repurchased shares, and no buybacks occurred in Q4 2025 or January 2026. Abel also stated that there are no plans to pay dividends at this time.

This suggests Berkshire’s record $373 billion cash reserve could continue to grow unless there is a significant stock price decline or major acquisition opportunity. In early January, the company spent about $9.5 billion to acquire Occidental Petroleum’s chemical business. Regarding dividends, Abel said that retaining earnings creates more long-term value for shareholders than paying dividends.

Some investors had hoped the new CEO would be more proactive in shareholder returns, such as proposing a $50 billion buyback plan, but no such measures have been announced. Currently, about $127 billion in cash is held at the parent company, providing more flexibility for buybacks or dividends, while most of the remaining cash is kept in insurance subsidiaries, which are subject to stricter regulation.

Additionally, the approximately $1.6 billion goodwill impairment in Q4 was not explicitly disclosed in the press release but was hidden in the appendix of the 10-K report, causing confusion among some investors. Abel did not hold a conference call for the earnings release and stated that he would continue Buffett’s tradition of not holding quarterly earnings calls, believing this aligns better with the company’s long-term investment philosophy.

Analysts note that amid sluggish revenue growth, flat profit outlooks, and large cash reserves not being effectively deployed, Berkshire Hathaway may struggle to command a higher market premium in the short term. Based on current market expectations, the company’s operating profit this year may see little to no growth.