Latest / Stock Picking with Fexingo: Individual Equities, Research, and Building a Concentrated Portfolio / How Berkshire Hathaway Is Defying the Tech Selloff in Mid-2026
Transcript
- Lucas: Luna, you've been watching the NASDAQ get absolutely hammered this week — down nearly 4 percent in five days. Microsoft off 7 percent. Nvidia off 6. Some very familiar names in the red. Luna: Brutal week for the AI trade, no doubt. But one name that's sitting pretty in green, up 3.4 percent in the same window, is Berkshire Hathaway. Lucas: Right. And that's not a fluke. Berkshire's been quietly grinding higher all year while the mega-cap tech stocks have been giving back gains. Today I want to talk about why that's happening — specifically, the role Berkshire's aggressive buyback program is playing, and what it says about where we are in the market cycle. Luna: Let's start with the buyback. Berkshire spent something like 3.5 billion dollars in the first quarter buying back its own stock. Is that the main driver? Lucas: It's a big part of it. When a company repurchases shares, it mechanically boosts earnings per share and tends to support the stock price. But with Berkshire, there's more to it. The buyback signals that Warren Buffett and his team think the stock is undervalued — even at 487 dollars a share for the B shares. They're putting money where their mouth is. Luna: And value stocks in general have been outperforming tech in recent weeks. The IWD and VTV are basically flat over the past five days while the NASDAQ has cratered. So there's a rotation happening. Lucas: Exactly. The market is repricing risk. The jobs report on Friday was hot — that pushed the idea of Fed rate cuts further out. Chair Warsh is facing a policy test. Higher rates for longer hurt high-duration, high-growth stocks like Nvidia and Tesla. But Berkshire? It's an insurance and railroad and energy conglomerate. It throws off cash. It benefits from higher interest income on its huge cash pile — 130 billion dollars or so. Luna: So Berkshire is becoming a sort of haven within equities. Lower volatility, a huge moat, and a management team that's been through multiple cycles. Lucas: You said it. And the buyback is accelerating. In the first quarter of 2026, Berkshire spent roughly 3.5 billion on buybacks. That's up from about 2.9 billion in the fourth quarter of 2025. The pace is increasing as the stock stays below what Buffett considers intrinsic value. Luna: But isn't there a tension there? Berkshire is sitting on a massive cash pile yet buying back stock instead of making big acquisitions. That seems almost like admitting they can't find good deals. Lucas: That's the classic criticism, yes. And it's fair. But I'd argue it's also a reflection of the environment. M&A is tough when asset prices are still elevated and regulatory scrutiny is high. Buffett has said in the past that buybacks are the best use of cash when shares trade below intrinsic value and there's no better opportunity. He's basically saying: we're the best investment we can find right now. Luna: And the market is rewarding that discipline. The stock is up 3.4 percent in a week when the S&P 500 is down 2.3 percent. That's a significant relative outperformance. Lucas: Let's put some numbers on Berkshire's structure to show why it's holding up. About 40 percent of Berkshire's value comes from its insurance operations — Geico, General Re, Berkshire Hathaway Reinsurance. Insurance is a cash-generating machine because of the float: you collect premiums upfront and pay claims later. With interest rates higher, that float earns more. That's a natural tailwind. Luna: And then you have the wholly owned businesses: BNSF Railway, Berkshire Hathaway Energy, Precision Castparts, See's Candies. Very different from the cyclicality of chips and cloud computing. Lucas: Exactly. BNSF is a volume-based business tied to the US economy. It's not immune to a slowdown, but it's not going to get disrupted by an AI model update. So when investors panic about Nvidia's gross margins compressing or Microsoft's capex surge, they rotate into something boring and predictable. Berkshire is that boring and predictable. Luna: And don't forget the equity portfolio. Berkshire still owns big stakes in Apple — though they've trimmed that — and Bank of America and Coca-Cola and American Express. Those are dividend-paying, stable companies. JPMorgan and Bank of America have actually been up this week as well. Lucas: That's a great point. JPMorgan is up 3.9 percent in the last five days. Bank of America up 3.4 percent. Financials are benefiting from higher rates, and Berkshire owns a lot of bank stocks. So the portfolio is getting a double boost: the buyback lifts the stock, and the holdings are in sectors that are working. Luna: I want to push back slightly, though. If Berkshire is so great, why isn't Buffett buying more? Why not buy back even more aggressively? Lucas: He's buying at a measured pace. The buyback is only done when Buffett and Charlie Munger's successor — Greg Abel — agree the price is below intrinsic value. They don't want to overpay even for their own stock. And they need to keep a huge cash buffer for the insurance operations and for potential opportunities. Remember, Berkshire's cash pile is part of its moat — it allows them to make large acquisitions or provide liquidity during a crisis. Luna: Fair enough. So if I'm an investor looking at this, what's the key takeaway? Is Berkshire a buy here? Lucas: I'm not giving personal advice, but I'll say this: Berkshire's buyback is sending a strong signal. The stock is trading at roughly 1.5 times book value — not dirt cheap historically, but reasonable for a company with such high-quality earnings. And the relative safety in a tech downturn is attractive to a lot of money managers right now. Luna: And if that signal is useful to you, if today's conversation helped you think about Berkshire or value investing a bit differently… Lucas, you know what I'm going to say. Lucas: Go ahead. Luna: This show is ad-free, and we want to keep it that way. The only way that happens is through listener support. If you got something out of this episode, the best way to say thanks is to buy us a coffee — literally, buy me a coffee dot com slash fexingo. It's how the lights stay on and the podcast stays independent. Lucas: Yeah. No pressure, no guilt. If the show adds value to your week, that link is there. And we'll keep doing what we're doing either way. Luna: Okay, back to Berkshire. One more angle I want to hit: the housing bet. Berkshire has been investing in homebuilding and real estate services — they own Clayton Homes, they have stakes in HomeServices of America. With rates staying high, housing has been a tough sector. But Berkshire seems to be playing the long game there. Lucas: Right. Housing starts have been sluggish, but there's a structural shortage in the US. Millennials are still forming households. So Berkshire's housing bets are about supply and demand, not about the next quarter. That's classic Buffett — investing in real assets that will be needed for decades. Luna: And that's why Berkshire can sleep at night when the NASDAQ drops 4 percent. The businesses are real, the cash is real, the buyback is real. Lucas: Exactly. And we're seeing that play out in real time. Over the past five days, Berkshire's stock has been an island of stability. I think that's worth paying attention to, regardless of whether you own the stock or not. It tells you something about where the market's head is. Luna: It tells you that investors are looking for safety, and Berkshire is providing it. Maybe the rotation into value has legs. Lucas: We'll see. For now, it's a fascinating case study in corporate capital allocation and market psychology. Thanks for digging into it with me, Luna. Luna: Always fun. That's it for this episode of Stock Picking with Fexingo. We'll be back tomorrow with another angle.