Berkshire Hathaway’s Market Benchmark: A Look at Recent Performance Trends

For decades, Berkshire Hathaway's performance under Warren Buffett set a benchmark for investment success, vastly outperforming the broader market. The company's compounded annual gain from 1965 through 2025 was 19.7%, nearly double the S&P 500's 10.5% total return over the same period. [2] However, in more recent years, the gap has narrowed, with several analyses indicating periods of underperformance against the index.

A Shifting Comparison

The narrative of consistent outperformance has become more nuanced. Over the last decade, the performance race has been tight. For the 10-year period ending in 2025, Berkshire posted an annualized return of 13.9% versus the S&P 500's 13.2%. [4] However, looking at shorter, more recent timeframes, the S&P 500 has had the edge. In the five years ending in 2025, the index returned 15.3% annually compared to Berkshire's 14.8%. [4] For the single year of 2025, the S&P 500 returned 23.1%, outpacing Berkshire's 18.4%. [4]

An analysis highlighted by the "Rational Reminder Podcast" illustrates how sensitive the comparison has become. It found that for a period of roughly 24 years ending in May 2026, Berkshire Hathaway's annualized return was just a few basis points behind a total U.S. stock market index fund. [3] The analysis noted that this razor-thin margin means the outperformer can change depending on the precise start and end dates used for the measurement. [3]

Factors Influencing Performance

Several structural factors are cited by analysts to explain this trend. A primary issue is what is known as "cash drag." Berkshire Hathaway holds a substantial amount of cash and short-term investments, which grew from $146.7 billion at the end of 2021 to a combined $397.38 billion by the first quarter of 2026. [3] While this cash provides stability and opportunity during market downturns, it can hinder overall returns during strong bull markets when equities are appreciating at a much higher rate. [3, 14]

The company's sheer size is another significant constraint. With a market capitalization over $1 trillion, it has become increasingly difficult to find acquisitions or stock investments large enough to have a meaningful impact on its overall performance. [11, 13] Warren Buffett, who stepped down as CEO at the end of 2025, acknowledged this challenge, stating that "size is an enemy of performance." [13]

Market dynamics have also played a role. The S&P 500's recent returns have been heavily driven by a small number of mega-cap technology stocks. [4] While Berkshire Hathaway has a major holding in Apple, its portfolio is more diversified across sectors like insurance, utilities, railroads, and consumer staples, which have not paced the returns of the high-growth tech sector. [4, 11] This diversification can lead to outperformance in down markets but underperformance during narrow, tech-led rallies. [4]

The leadership transition to new CEO Greg Abel, who took over from Buffett, also marks a new era for the company, with investors watching closely for any shifts in capital allocation strategy under the new leadership. [3, 6]

Sources

• Warren Buffett vs. the S&P 500: Growth of $100 (1965–2025)
• Warren Buffett Underperformed the Stock Market His Last 24 Years Investing: Don't Make One Crucial Mistake That Crushed His Returns
• Berkshire Hathaway (BRK/B) vs the S&P 500: Which Should You Own?
• Warren Buffett Trails S&P 500 In Final Year As Berkshire CEO — Here's His 25-Year Scorecard
• Berkshire Underperformance After Buffett's Exit
• Warren Buffett Says Berkshire Hathaway is Struggling From Its Success and He Doesn't 'Know Any Good Way to Solve' It
• 90% Outperformed Warren Buffett in His Last Year. So What?
• Chart: Buffett's Berkshire Hathaway: Consistent Outperformance

Educational and informational content. Not financial, investment, tax or legal advice, nor a recommendation to buy or sell any asset.