Though not an official term, the "Buffett premium" theory is an idea that Buffett's name or presence adds value to Berkshire Hathaway’s stock price. The term “Buffett premium” refers to an increased price investors are willing to pay for stocks because of Warren Buffett's name and reputation being attached to the company. If this premium does exist, it is impossible to pin a specific value on it.

Some believe a Buffett premium may have existed 20 years ago but that it no longer has any discernible impact. The theory is that Buffett's investing skill and charisma were more important before Berkshire Hathaway became just as established a name on Wall Street as Buffett himself.

Some analysts do not subscribe to a Buffett premium theory. According to them, Buffett’s presence at Berkshire Hathaway lends credence to its investment choices but only in much the same manner as the presence of any key player. These analysts believe in Berkshire Hathaway as an investment entity in and of itself, with its decades-long track record of success to support its rightful place in Wall Street lore.

For those who believe in a Buffett premium and are invested heavily in Berkshire Hathaway, possible repercussions of Buffett’s death or retirement are an important consideration for their financial future. If Buffett were to die suddenly, it is certainly possible the price of Berkshire Hathaway might suffer at least a temporary sharp drop.

The "Oracle of Omaha" may retain a supporting effect on stock price even from the grave. Any stock buys or acquisitions Buffett was planning on making just prior to his death may take on a magical quality all their own, in the end becoming successful in part because that is what Buffett expected them to do.

Finally, there are analysts who believe Berkshire will actually benefit from Buffett's departure, suggesting that for all his skill as an investor, Buffett has flaws and blind spots like anyone else, and Berkshire Hathaway will benefit from fresh investment perspectives that arise following his death or retirement.

  1. What was the worst investment Warren Buffett made in his career?

    Discover what Warren Buffett's surprising answer is to the question of what was the single worst investment that the "oracle ... Read Answer >>
  2. What is Warren Buffett's annual salary at Berkshire Hathaway?

    Learn more about how much Warren Buffett receives in salary and how he continues to stay involved with his company and his ... Read Answer >>
  3. Why doesn't Berkshire Hathaway pay a dividend?

    Learn why Berkshire Hathaway, despite being flush with cash, does not pay dividends. Read Answer >>
  4. Does the massive size of Berkshire Hathaway reduce its future returns?

    Find out why Warren Buffett's holding company, Berkshire Hathaway, may eventually grow so large that it may struggle to maintain ... Read Answer >>
  5. What is Warren Buffett's largest holding?

    Coke? IBM? American Express? Buffett's Berkshire Hathaway has a stake in several major companies. Find out which company ... Read Answer >>
  6. How Warren Buffett chooses the stocks he buys

    Investors have long praised Warren Buffett’s ability to pick great companies to invest in. Here are the key considerations ... Read Answer >>
Related Articles
  1. Insights

    Who is Driving Berkshire Hathaway's Management Team? (BRK.B)

    A look into Berkshire Hathaway’s core management team and how they work together to deliver consistent returns over the long term.
  2. Investing

    Is Warren Buffet's Investment Strategy Suitable for Your Financial Profile?

    Learn about how investors may not be able to replicate Warren Buffett's value investing strategy. See how they can still easily follow Buffett's sage advice.
  3. Investing

    Highlights From the 2017 Berkshire Hathaway Annual Meeting

    Wells Fargo fallout, the Apple of Buffett's eye, self-driving cars and more.
  4. Investing

    Two Things We Learned From Billionaire Warren Buffett's Shareholder Letter

    Billionaire Warren Buffett heaped praise on his potential successors in his annual letter to Berkshire Hathaway shareholders.
  5. Investing

    What Will Become of Berkshire Hathaway Beyond Buffett?

    Warren Buffett, who has become almost synonymous with the term “investor,” remains robust, but at 83 is clearly somewhere in the fourth quarter of the game. What does that mean for Berkshire ...
  6. Financial Advisor

    Inside Warren Buffett's Woodstock for Capitalists

    The annual Berkshire Hathaway meeting kicks off this weekend, and it's the 52nd year with Warren Buffett at the helm. Here's what to expect at the meeting.
  7. Investing

    Warren Buffett's 2015 Portfolio Report Card (BRK.B, WMT)

    Learn how Warren Buffett's portfolio performed in 2015. Read about an unusual position Berkshire Hathaway took in Phillips 66 during the year.
  8. Investing

    The Best Books On Warren Buffett

    These six books aren’t as satisfying as owning Berkshire-Hathaway shares, but there is a lot of knowledge and enjoyment in them nonetheless.
  9. Investing

    Berkshire Hathaway Has Almost $100B in Cash

    The company could make acquisitions, but the market's bull run is a deterrence.
  10. Investing

    Paul Singer Challenges Uninterested Warren Buffett to Bidding War

    Paul Singer's hedge fund has indicated plans to enter a bidding war with Warren Buffett, despite the Berkshire Hathaway leader's reluctance.
  1. Warren Buffett

    Known as "the Oracle of Omaha", Buffett is Chairman of Berkshire ...
  2. Berkshire Hathaway

    Berkshire Hathaway is a holding company for a multitude of businesses, ...
  3. Oracle Of Omaha

    The Oracle of Omaha is a nickname for Warren Buffett, who is ...
  4. Baby Berkshire

    Baby Berkshire refers to the 50:1 stock split after the market ...
  5. Holdings

    The contents of an investment portfolio held by an individual ...
  6. Buffett Rule

    A tax rule proposed in 2011, by President Barack Obama, stating ...
Hot Definitions
  1. Liquidity

    Liquidity is the degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's ...
  2. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  3. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  4. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  5. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  6. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
Trading Center