This is a regular installment of the Warren Buffett Watch newsletter, providing news, insights, and comprehensive analysis on all things Warren Buffett and Berkshire Hathaway.
Six years have passed since Berkshire Hathaway was forced to take a staggering $11 billion write-down on its $37.2 billion acquisition of Precision Castparts, a deal finalized in 2016. At the time, Warren Buffett did not mince words in his annual letter to shareholders, openly admitting that he had simply paid "too much" for the manufacturing firm, which specializes in complex metal components and specialized products for heavy industry.
While Buffett maintained that Precision Castparts was a "fine company — the best in its business," he confessed that he had been "simply too optimistic" about its long-term profit potential. That miscalculation was laid bare when the unprecedented downturn of the Covid-19 pandemic severely crippled the global aerospace industry, which historically served as Precision Castparts’ largest and most lucrative customer base.
Reflecting back on the initial transaction during a CNBC interview when the deal was first announced, Buffett acknowledged candidly that it was "a very high multiple for us to pay." However, speaking directly to shareholders at the 2016 annual meeting in Omaha, Nebraska, he expressed profound confidence in Mark Donegan, the company’s chief executive officer, praising his leadership and reiterating his long-term faith in the firm’s underlying profit outlook.
That patient long-term bet, though it took considerably longer to materialize than Buffett originally planned, is now looking remarkably astute. Industry observers and market analysts note that a severe supply shortage has developed for the high-end, complex metal products manufactured by Precision Castparts, which are critical components for jet engine turbine blades. Furthermore, these specialized components are increasingly vital for natural gas turbines, a sector experiencing surging demand to generate the massive amounts of electrical power required to sustain rapidly expanding artificial intelligence data centers.
The surging valuation of this market was thrown into sharp relief when GE Aerospace announced it would pay nearly $12 billion—specifically $11.75 billion—to acquire Consolidated Precision Products, one of the few remaining direct competitors to Precision Castparts. Wall Street analysts at Barron’s described that transaction as a "pricey" valuation, coming in at roughly 26 times projected earnings before interest, taxes, depreciation, and amortization for 2027.
Applying that same earnings multiple to Berkshire’s subsidiary, Barron’s estimates that Precision Castparts is now worth an astounding $100 billion. That figure sits well above the estimated $60 billion to $75 billion valuation range cited in a previous publication just a month prior, which had already designated the unit as likely one of the most valuable operating divisions within the broader Berkshire Hathaway corporate empire. This current estimated worth is nearly three times the initial 2016 purchase price, vindicating Buffett’s enduring structural thesis despite the severe macroeconomic headwinds of the pandemic era.
Despite this dramatic turnaround, financial analysts have pointed out that Berkshire Hathaway and its underlying share price are not receiving adequate market credit for the surging value of the subsidiary. This valuation disconnect is driven in part by the leadership style of CEO Greg Abel, who, much like Warren Buffett before him, avoids traditional analyst conference calls, quarterly earnings guidance sessions, and high-profile investor events that might otherwise draw direct Wall Street attention to specific divisional performances. Some market experts suggest that as leadership transitions into a new era, Berkshire may eventually need to adopt a more communicative approach to storytelling if it hopes to capture the imagination of a new generation of retail and institutional investors.
Berkshire Bounces Against a Wider Wall Street Sell-Off
Bucking broader market trends, Berkshire Hathaway shares managed to secure a modest gain during a week when Wall Street’s major equity averages finished lower. Both the Class A and Class B shares of Berkshire climbed by nearly 0.9%, offering a stark contrast to the S&P 500 index, which slipped by 0.8%.
Prior to a late-week stabilization, major benchmarks including the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite had suffered four consecutive sessions of losses. That downward pressure was primarily fueled by rising oil prices and climbing bond yields, which weighed heavily on investor sentiment across multiple sectors. Despite this recent outperformance by Berkshire’s stock, its Class B shares still trail the broader S&P 500 benchmark by more than 10 percentage points for the year to date.
Nebraska Political Campaign Adjusts Ad Featuring Buffett’s Image
In regional political news, the campaign team for the Republican candidate running in Nebraska’s 2nd Congressional District accelerated the deployment of a newly produced television commercial following an objection from Susie Buffett regarding a previous campaign spot that briefly incorporated an image of her father.
In the initial commercial, a photograph of Warren Buffett alongside his name appeared on screen for approximately two seconds while candidate Brinker Harding stated, "Here in Omaha, we know a thing or two about the stock market, some more than others. But we do it without insider information." The candidate then proceeded to advocate for a legislative ban on stock trading by members of Congress, arguing that certain lawmakers leverage non-public information for personal financial gain while ordinary citizens struggle to make ends meet.
Local news reports from Omaha ABC affiliate KETV revealed that Susie Buffett contacted Harding to request the removal of the advertisement, emphasizing that her father had never granted permission for his name or likeness to be used, and noting that the inclusion incorrectly implied a political endorsement.
While Harding’s campaign maintained that the ad was never intended to suggest an endorsement, representatives confirmed they chose to respect the Buffett family’s concerns by expediting the rollout of their next scheduled commercial by several days. The revised television ad currently airing across local stations no longer features or references Warren Buffett.
Reflecting on Berkshire’s History and Insurance Strategy
Looking back at archive materials from Berkshire’s storied corporate history, transcripts from the 2002 annual meetings highlight the profound impact that historical events like the September 11 attacks had on the company and the global insurance industry. Responding to shareholder inquiries at the time, Warren Buffett detailed how the tragedy fundamentally reshaped his views on human behavior, geopolitical risk, and risk underwriting.
Buffett noted that the catastrophe forced insurers to recognize that they had been carrying massive, unquantified exposures without charging appropriate premiums or explicitly excluding catastrophic risks like terrorism. In the wake of 9/11, Berkshire fundamentally altered its underwriting standards, ensuring that new policies either appropriately priced high-level risks or strictly excluded nuclear, chemical, and biological threats to protect the solvency of the firm and the broader insurance market from systemic collapse.
