Something strange happened in Omaha this weekend.

Berkshire Hathaway just posted $11.35 billion in Q1 2026 operating profit – up 18% from $9.64 billion a year ago. The insurance arm alone delivered $1.717 billion in underwriting profit, a 28.5% jump from the prior year, driven by a calm catastrophe quarter and a massive rebound in P&C reinsurance. BNSF railroad earnings rose 13% to $1.38 billion. Manufacturing, service, and retail units added $3.2 billion. Cash hit a record $397.4 billion – up from $373 billion at year-end 2025 and past the previous all-time high of $381.6 billion set in Q3 2025.

One catch: the $11.35B print came in slightly below the FactSet consensus of $11.56 billion. Not a disaster. Not the blowout beat the headline numbers imply either. The market noticed.

And yet BRK.B is down roughly 6.6% year to date, while the S&P 500 has gained close to 5% over the same stretch. Zoom out twelve months and the gap widens further – BRK.B trailing the index by more than 40 percentage points on a total return basis. That’s not noise. That’s a signal worth examining.

That gap is the story.

What Actually Happened at the Meeting

Saturday was the first Berkshire annual meeting without Buffett at center stage. Greg Abel – officially CEO since January 1, 2026 – ran the show at CHI Health Center in Omaha. Buffett sat in the crowd, made remarks from his seat, and told shareholders that Abel is “doing everything I did and then some, and he’s doing it better in all cases.” Buffett compared financial markets to a church with a casino attached. He said the gambling impulse in markets is at a peak. He wasn’t wrong.

Abel opened the Q&A with a deepfake Buffett video – a prerecorded AI-generated clip of Buffett asking why investors should still hold Berkshire shares. Abel later revealed it wasn’t real, using the moment to highlight the cybersecurity risks Berkshire is actively managing across its businesses. Direct, deliberate, very Berkshire. He was equally clear that Berkshire isn’t going to chase AI for its own sake – though he noted BNSF has already begun integrating AI tools for practical problem-solving.

What mattered most: Abel highlighted the firm’s cash position of $397.4 billion in cash and Treasuries and framed it plainly – the firm does not intend to be beholden to anyone. That’s not dead weight. That’s optionality at scale, and it’s earning T-bill yields while it waits.

Worth noting: Berkshire was a net seller of equities in Q1 – offloading $24.1 billion in stock against roughly $16 billion in purchases. The cash pile didn’t swell because the business slowed down. It swelled because Abel still doesn’t see enough to buy at current prices.

The Abel Era – Early Moves Worth Watching

He’s wasting no time putting his stamp on the portfolio. Abel has moved to unwind positions previously managed by Todd Combs, the longtime investment manager and GEICO chief who departed for JPMorgan Chase at year-end 2025. According to reporting from the Wall Street Journal, Abel decided to sell Combs-linked holdings – names thought to include technology and financial stocks – and has said he is unlikely to bring on a replacement. Ted Weschler now manages roughly 6% of the roughly $300 billion equity portfolio. Abel directly oversees the rest.

On Kraft Heinz: the position remains on the books, and remains painful. Berkshire took a $3.8 billion impairment hit on the holding last year. As of Q1 2026, the book value of Berkshire’s stake still exceeds its fair value by $1.4 billion. Abel’s first shareholder letter called the investment’s return “well short of adequate” – a notably candid assessment. The firm held off on a fresh impairment charge for now, but few observers expect this position to stick around much longer.

The core equity portfolio at end of Q1: American Express, Apple, Bank of America, Coca-Cola, and Chevron – those five names account for 61% of the portfolio’s aggregate fair value. The Japanese trading house stakes remain, funded by yen-denominated borrowing at an average cost of roughly 1.2%.

One more thing: Abel used his entire after-tax 2026 compensation of approximately $15.3 million to personally buy Berkshire shares – 21 Class A shares – and said he plans to do so every year for as long as he’s CEO. That’s not a press release move. That’s skin in the game.

The Numbers Beneath the Numbers

A few things worth sitting with before you reach a verdict on valuation.

• Insurance total profit: $4.4 billion in Q1, up 4% year-over-year. The underwriting rebound was real – but GEICO specifically saw a 34% drop in pre-tax underwriting profit as accident claims and marketing costs climbed. The headline insurance number flatters the GEICO picture.
• BHE (Berkshire Hathaway Energy): Edged up 2%, supported by natural gas pipeline strength, partly offset by higher maintenance and wildfire prevention costs. Not a high-growth story right now.
• Insurance float: $176.9 billion at March 31, 2026 – up roughly $500 million since year-end. Float is the engine. As long as it grows and underwriting stays disciplined, the model works.
• Equity sales: Net outflow of roughly $8.1 billion in Q1. Berkshire sold $24.1 billion of stocks and bought $16 billion. The posture is still cautious.
• Buybacks: $234 million in Q1 – the first repurchases since May 2024. No buybacks were made in the first two weeks of April.
• Revenue: Q1 2026 revenue came in at $93.68 billion, up from $89.73 billion a year ago.
• Valuation: BRK.B currently trades at roughly 15.3x earnings – below the diversified financial industry average P/E of ~17.5x and well below the broader peer group average near 22.5x.

The Cheap Case

Here’s where I’m at on this. The market is pricing in transition risk. Some of that is legitimate – GEICO’s underwriting deteriorated even as the broader insurance unit held up, insurance comparisons get harder in 2026, and Abel hasn’t announced a signature acquisition yet. The Kraft Heinz hangover isn’t fully resolved. And a CEO who’s spent his career running utilities and energy businesses is now directly overseeing a $300 billion equity portfolio. That’s a big job.

But here’s the thing that keeps pulling me back: a conglomerate earning $11+ billion per quarter in operating profit, sitting on nearly $400 billion in cash, trading at a discount to its own industry average on earnings – with a new CEO who is literally buying stock with his entire paycheck. That combination doesn’t come around often.

Slight tangent, but it matters: the float. Most investors focus on Berkshire’s cash pile and miss the $176.9 billion in insurance float sitting underneath it – capital Berkshire effectively borrows for free (and often at a profit) to fund its investments. That’s not on the balance sheet in the way most people think about it. It’s a structural advantage that doesn’t show up in a P/E ratio.

The resumption of buybacks – even at just $234 million – matters directionally. Abel called Berkshire “a unique conglomerate” in its ability to move capital from insurance to non-insurance, equities, or cash with unusual efficiency. The message to shareholders was essentially: we’re patient, we’re not beholden to anyone, and when the pitch comes, we’ll swing.

Bull / Base / Bear

• Bull case: Abel finds a large acquisition at a reasonable price, deploys a meaningful chunk of the $397B, buybacks accelerate, and the market re-rates the stock closer to intrinsic value. Insurance margins hold. Float keeps growing. The P/E discount to peers closes.
• Base case: No major deal in 2026. Buybacks tick up modestly. Operating earnings grow at a mid-single-digit pace. The stock grinds higher but lags the index again. Abel keeps trimming legacy positions and the portfolio becomes leaner and more legible over time.
• Bear case: A major catastrophe event eats into insurance profits. GEICO’s margin deterioration deepens. Kraft Heinz requires another impairment. A market downturn hits the equity portfolio hard on a mark-to-market basis (even if operating earnings hold). Abel fails to deploy capital meaningfully and the cash pile becomes a liability in a falling-rate environment.

The Cheap Investor Scorecard

• Q1 operating earnings: $11.35B – confirmed, up 18% YoY
• Cash and Treasuries: $397.4B – record high, up from $373B at year-end
• Insurance underwriting: $1.717B – up 28.5%, supported by low catastrophe losses
• GEICO underwriting: Down 34% – claims and marketing costs climbing, watch closely
• BNSF profit: $1.38B – up 13%, grain and energy demand the driver
• Insurance float: $176.9B – growing, the structural engine most investors undervalue
• Buybacks: $234M in Q1 – resumed after 11+ month gap, no activity in early April
• CEO skin in the game: $15.3M of personal capital in Berkshire shares, annually
• Portfolio reshaping: Combs positions being unwound, Kraft Heinz under review
• Valuation: ~15.3x earnings vs 17.5x industry average – meaningful discount

The question isn’t whether Abel is Buffett. He isn’t. The question is whether he’s good enough – and whether the stock is cheap enough for that distinction to matter. Right now, the market seems to be betting no. At 15x earnings, with $397 billion in dry powder and a CEO betting his own paycheck on the outcome, that might be the most interesting bet on the board.

Worth a closer look.