Warren Buffett is totally crushing it this year

• Berkshire Hathaway stock has jumped 16% this year while the S&P 500 has dropped 2%.
• Investors are flocking to Warren Buffett's company because of its huge cash reserves and reputation.
• Buffett is known for capitalizing on market chaos and has assuaged succession concerns.

Warren Buffett is off to a roaring start to 2025 with shares of his Berkshire Hathaway conglomerate up 16%, trouncing the benchmark S&P 500's 2% decline.

The stock surge has boosted Buffett's net worth by an unmatched $23 billion, vaulting him past Bill Gates into sixth place on the Bloomberg Billionaires Index with a $165 billion fortune.

The 94-year-old business icon and his company are riding high as investors seek shelter from roiling markets, and back the legendary bargain hunter to pounce if asset prices crash and the economy tanks.

They're also cheering a rebound at Berkshire-owned Geico, and banking on Buffett's planned successor to deliver when the time comes.

Port in a storm

"Berkshire is a stable, solid ship in a sea of uncertainty right now," Paul Lountzis, the president and founder of Lountzis Asset Management, told Business Insider.

The longtime Berkshire shareholder pointed to the company's "rock of Gibraltar" balance sheet, which boasted more than $320 billion in cash, Treasurys, and other liquid assets at the end of December, and stocks worth more than $270 billion.

Buffett has transformed Berkshire from a failing textile mill into a $1 trillion juggernaut during his 60 years in charge. He's acquired scores of businesses across myriad industries including See's Candies, Precision Castparts, and the BNSF Railway, and built multibillion-dollar stakes in blue-chip stocks such as Apple, Coca-Cola, and American Express.

Berkshire stock has soared in value by more than 5,500,000% during Buffett's tenure, crushing the S&P's roughly 39,000% gain over the same period. The stock has compounded at about 20% a year for six decades — almost twice as fast as the benchmark.

The billionaire philanthropist is also known for prudently managing Berkshire, prizing long-term success over short-term gains.

"In an uncertain world, investors place a higher value on the certainty that Berkshire offers," Darren Pollock, a portfolio manager at Cheviot Value Management and another veteran shareholder, told BI. "Consistency and reliability often get a bid when froth exits financial markets."

Cathy Seifert, a senior vice president at CFRA Research and longtime Berkshire analyst, said there's been a "flight to quality amid an upswing in market and geopolitical volatility," and investors see Buffett's sprawling empire as a safe haven.

Profiting from chaos

Buffett is a value investor who specializes in spotting and scooping up stocks and businesses at a discount to their true worth. The best time to do that is when prices tumble and the pool of buyers dries up.

"Warren Buffett has often demonstrated he is at his best with capital allocation with more challenging conditions," Macrae Sykes, a portfolio manager at Gabelli Funds, told BI. He's "shown a unique ability to see through the noise and find value."

For example, the legendary investor struck lucrative deals with Goldman Sachs, General Electric, Mars, Dow Chemical, and Swiss Re during the financial crisis.

He deployed more than $21 billion across those five transactions between 2008 and 2009, securing positions worth a combined $26 billion — and yielding $2.1 billion in yearly interest and dividends — by the end of 2009.

Fast forward to today and Berkshire's huge "cash cushion" gives it "tremendous firepower for bargain hunting should opportunities arise," Pollock said.

Buffett's patience, discipline, and refusal to buy into bubbles and trendy stocks has paid off in the past. When the dot-com bubble burst and the S&P fell by an average of 14% a year between 2000 and 2002, Berkshire shares rose by 10% on average during those three years as investors dumped expensive tech stocks and returned to tried-and-tested names.

Berkshire stock "substantially outperformed" the market in 10 of the 12 years the S&P declined during Buffett's leadership of Berkshire, David Kass, a finance professor at the University of Maryland who's followed Buffett for four decades, told BI.

Lifting the hood

Berkshire's business performance has also made it a draw for investors. The company has some "fundamental momentum," Sykes said, noting it generated about $30 billion of operating cash flow last year, or about $600 million a week.

Geico's profits soared last year as Todd Combs, the car insurer's CEO and one of Buffett's two investment managers, boosted efficiency and updated its underwriting practices.

Buffett described Geico as a "long-held gem that needed major repolishing" in his latest annual letter, and hailed its recent performance as "spectacular."

The recovery helped lift Berkshire's operating earnings by 71% year-on-year last quarter. Kass said that was a key reason why its shares have outpaced Magnificent Seven stocks such as Microsoft and Alphabet this year.

Seifert said the Geico turnaround should "significantly aid" Berkshire's profit growth given it's one of the company's most important business units. She also noted the Federal Reserve's hikes to interest rates since 2022 have made Berkshire's mountain of bonds more lucrative.

Buffett's company raked in nearly $22 billion of interest, dividend, and investment income last year, up from less than $16 billion in 2023 and about $10 billion in 2022.

Berkshire after Buffett

Buffett and Berkshire have become virtually synonymous, making it hard to imagine another CEO filling his shoes. Yet the demise of his longtime business partner, Charlie Munger, a few weeks shy of his 100th birthday in late 2023, underscored the Buffett era is nearing an end.

Buffett has carefully planned for his departure and worked to build shareholders' comfort with Greg Abel, the head of Berkshire's non-insurance businesses and his chosen successor.

A final reason for Berkshire's stock gains this year is "growing confidence" in Abel's ability to make Berkshire's subsidiaries sing and shrewdly allocate the company's capital, Sykes said.

Buffett has "done a great job preparing the firm for a future without him," Lountzis said. "There is not much more he could do — though I do wish he could clone himself and Charlie to keep running it for another 60 years."