Berkshire’s Warren Buffett premium fades

One big analysis to start: A wave of directors has left Britain since Sir Keir Starmer’s government abolished favourable tax treatment for non-domiciled residents and raised other duties on the wealthy, with the United Arab Emirates the most popular destination.

In today’s newsletter: 

Berkshire investors weigh life without Buffett

Berkshire Hathaway shares hit an all-time high in early May, as investors panicked over US President Donald Trump’s “liberation day” tariffs and sought refuge in the safe hands of Warren Buffett.

Little did they know that days after they had pushed Berkshire’s class A shares to a record, Buffett would announce he planned to step down as chief executive.

Since then, the conglomerate’s high-vote A shares have fallen 14 per cent, trailing the S&P 500 by one of the biggest margins in decades.

It’s early days, but it could indicate that the “Buffett premium” that has for so long imbued Berkshire’s stock is slowly fading.

The 94-year-old has entrusted his business to Greg Abel, but it’ll take years before Buffett’s successor can prove his worth to shareholders. For now, investors are reckoning with the impending retirement of a man who has been a fixture in finance for more than half a century.

The drop in Berkshire’s stock contrasts with an 11 per cent return on the S&P 500, including dividends. Investors have largely shrugged off fears they had about an impending US economic slowdown and have embraced fast-growing tech stocks.

The lag in Berkshire’s shares compared to the index is now one of the biggest it has suffered for any three-month period going all the way back to 1990, according to calculations by DD’s Eric Platt.

The only other time Berkshire has trailed the S&P 500 by a greater margin was in the middle of the Covid-19 pandemic in 2020. (Investors cut their equity positions, and insurers and financial services companies — core parts of the Berkshire empire — were hit especially hard.)

But let’s not get too carried away. Buffett and Berkshire think in decades, not months, and the veteran investor has for the past few years been moving his money out of the tech stocks that have powered the S&P 500’s surge.

And Berkshire’s record since Buffett took over speaks for itself: in the time since he took control through to the end of last year, Berkshire had outperformed the S&P 500 by more than 5mn percentage points.

Buffett famously sat out the dotcom rush of the late 1990s, a move that was vindicated when it emerged that the boom was actually a bubble.

Berkshire is now sitting on $344bn in cash and Treasuries, putting it in a safe position should a similar thing play out with the AI boom of the present decade.

Nonetheless, DD will be watching closely to see how investors respond as Berkshire adapts to life without Buffett.

Peter Thiel’s big, beautiful windfall

Elon Musk was an outspoken critic of Trump’s “big, beautiful bill”, which has slashed government incentives that benefited his carmaker Tesla.

Musk’s fellow PayPal co-founder Peter Thiel has reason to be more cheerful: Thiel-backed businesses are set to reap billions of dollars in government contracts, thanks to a provision buried deep in the BBB.

The legislation earmarks roughly $300bn to modernise the US military, defence infrastructure and homeland security, areas in which Thiel’s businesses are well-versed.

Take the $6bn set aside by the BBB for new border security technology. A portion of that will be allocated towards autonomous surveillance towers, for which there’s currently only one approved supplier: Anduril — co-founded by Palmer Luckey and backed by Thiel.

Since Trump took office, defence tech groups have been on a winning streak, bolstered by a surge of government contracts aimed at modernising American defence systems and securing US borders. 

Thiel’s data intelligence business Palantir is the best-performing company on the S&P 500 this year, and it’s also set to be a BBB beneficiary.

The software group secured a $30mn contract in April to build a platform to track migrants and deportations for US Immigration and Customs Enforcement. 

Anduril has seen a rise in sales of its autonomous drones, submarines and surveillance systems to the military. The California-based company has been a big supplier of surveillance towers to US Customs and Border Protection. 

Members of Trump’s family and administration are also invested in some of the businesses.

1789 Capital, which Donald Trump Jr joined last year, was an early backer of Anduril and the Thiel-backed defence manufacturing start-up Hadrian.

Even the kids will benefit: White House deputy chief of staff Stephen Miller owns at least $100,000 in Palantir stock via his child’s brokerage account, according to public disclosures.

KKR and Advent’s gazumping game

The fight for FTSE 250-listed Spectris has taken yet another unexpected turn, as buyout groups KKR and Advent International battle it out for the scientific instruments maker.

At the start of July it looked like Advent had the deal sewn up, with Spectris having agreed to a £4.4bn offer from Advent the previous month. But it ain’t over till the fat lady sings.

KKR tried to hijack Advent’s bid with an offer of £4.7bn and Advent responded on Friday by increasing its own offer to £4.8bn.

Not to be outdone, KKR pushed its bid up to slightly above that this week. Spectris said on Tuesday its board had accepted a bid worth £41.75 per share in cash, topping last week’s £41-per-share cash bid from Advent. 

As DD has noted previously, it’s not often that you see two buyout giants publicly fighting for a business like this. It’s a sign of private equity’s interest in cheap UK-listed companies, with some buyout groups spotting a bargain in the country’s depressed public market valuations.

It follows EQT’s £2.2bn deal for Irish gaming company Keywords Studios and US buyout firm Thoma Bravo’s £4.3bn acquisition of cyber security company Darktrace.

KKR’s latest bid for Spectris represents a 105 per cent premium to the stock price on June 6, before takeover interest in the company became public.

It’s clear that KKR and Advent both see the scientific instrument maker as a shrewd buy. Given that, the gazumping may well continue.

Job moves

• Telehealth start-up eMed Population Health has appointed Linda Yaccarino as chief executive, weeks after her shock departure from Elon Musk’s X.

• Oaktree Capital has named Alexander Bues as managing director and US head of business development for its power opportunities strategy. He was previously a partner at Soundcore Capital Partners.

• King Street has hired Michael Fuller as managing director in its European real estate team. He was most recently a managing director at Brookfield Property Group.

• White & Case has appointed Robin Melman as a partner in its M&A and employment, compensation and benefits practices. She joins from Baker Botts, where she chaired its employee benefits and executive compensation team.

Smart reads

Jumping ship Big Tech groups’ “acqui-hires” have delivered them top AI business founders. But the start-ups they depart are left stranded, Bloomberg reports.

Number go up Palantir is giving its customers what they want and raking in cash. Its valuation is nevertheless nonsensical, Lex writes.

Watch your mouth Be careful what you say in meetings, because there’s a chance an AI note taker is scribbling it all down. One marketer found that out the hard way, The Wall Street Journal reports.

News round-up

OpenAI releases open models to compete with China’s DeepSeek (FT)

Deutsche Bank chief approved controversial trade he was later asked to probe (FT)

Norway to review $2tn oil fund’s investments in Israeli companies (FT)

Apollo assets hit record high as markets whipsaw on Donald Trump’s tariffs (FT)

Donald Trump claims JPMorgan Chase and BofA turned away his business (FT)

Musk seeks dismissal of lawsuit over his $7.5bn Tesla stock sale (Bloomberg)

BP to cut 6,200 jobs as it launches second business review in 6 months (FT)

Former TSMC staff arrested for alleged theft of chipmaker’s technology (FT)