The Index Fund Buffett Told You to BuyNarrow moat

Berkshire Hathaway (BRK.B) — moat facet

Berkshire's most credible competitor for a shareholder's dollar is the index fund its own chairman spent decades recommending.

The competitor that matters most to a Berkshire shareholder is not an insurance company or a railroad. It is a low-cost S&P 500 index fund — an alternative Warren Buffett recommended publicly and repeatedly, instructed his own estate to use, and famously won a ten-year wager defending.

Operating earnings per Class B share ($)$17.192023$22.002024$20.622025Operating earnings / average equivalent Class B shares; Forms 10-K FY2024-FY2025
What the retained earnings produce per share — the number that has to beat the index.

This is a genuine competitive relationship rather than a rhetorical one. Berkshire's proposition is that a shareholder is better off owning this particular collection of businesses, managed by these people, than owning the market. Every year that Berkshire fails to beat the index, the case weakens — and the index charges almost nothing, requires no judgment about succession, and cannot be affected by a single manager's departure.

The company's honest answer is not that it will outperform. It is that Berkshire's earnings are less volatile than the market's, that its balance sheet is stronger than any index constituent's, and that it is structurally positioned to buy when everyone else is forced to sell — which is a different product from an index fund, not a better version of one. The root trajectory on this company reflects a mature fortress rather than a compounding machine.

Watch Berkshire's book value per share and operating earnings against the index over rolling five-year periods. Buffett proposed that comparison himself. Sustained underperformance would not mean Berkshire is a bad business — only that its own chairman's advice applied to his own company, and that $44.5 billion of operating earnings in 202512 is a different proposition from an index.

Moat trajectory: Holding steady

The comparison Buffett proposed himself has not moved decisively either way. Berkshire remains a lower-volatility, fortress-balance-sheet alternative to the index rather than a reliable outperformer, and its case now rests more on what it can do in a crisis than on compounding faster in good years. Stable, and honest about what it is.

The number that tests this moat
Third-party estimate
Price-to-book value
1.44x in September 2026

Against an index, Berkshire has to be bought cheaply to beat it. A multiple well above 1.5x with operating earnings flat would leave little margin over the fund.

Source: stockanalysis.com ↗
References
  1. ReportedSustained underperformance would not mean Berkshire is a bad business — only that its own chairman's advice applied to his own company, and that $44.5 billion of operating earnings in 2025 is a different proposition from an index.
    Berkshire Hathaway Form 10-K, FY2025 - float $176 billion; after-tax earnings 2023-2025 (underwriting $7,258M, insurance investment income $12,513M, BNSF $5,476M, BHE $3,979M, manufacturing, service and retailing $13,647M in 2025; net earnings $66,968M incl. $30,737M investment gains and an $8,255M Kraft Heinz/Occidental impairment); revenues $371,444M; segment revenues (insurance $104,212M incl. premiums earned $88,902M and investment income $15,310M, BNSF $23,533M, BHE $26,297M, manufacturing $78,487M, service and retailing $42,647M, McLane $50,998M, Pilot $42,198M); pre-tax underwriting GEICO $6,824M, Primary $785M, Reinsurance $1,851M; GEICO combined ratio 84.7% (81.5%, 90.7%) and loss ratio 72.3%; capex $20,927M and D&A by segment; identifiable assets and goodwill by segment; 65% of equity fair value in five companies; equity securities $297.8B ($271.6B); BNSF volumes by business group; no share repurchases in 2025; no cash dividend since 1967; about 387,800 employees — FY2023-FY2025 · publ. March 2026 · source ↗
  2. Moat Explorer calcSustained underperformance would not mean Berkshire is a bad business — only that its own chairman's advice applied to his own company, and that $44.5 billion of operating earnings in 2025 is a different proposition from an index.
    Moat Explorer calculation from Berkshire's Forms 10-K FY2016-FY2025 and 10-Qs for Q1 and Q2 2026: operating earnings = net earnings less after-tax investment gains and the 2025 impairments (FY2023 $37,350M, FY2024 $47,437M, FY2025 $44,486M; Q2 2026 $12,983M vs $11,160M; H1 2026 $24,329M vs $20,801M); consolidated cash and Treasury Bills $397.4B (31 March 2026) and $365.5B (30 June 2026); underwriting as a share of float; OxyChem at 2.6% of the cash pile; five-line after-tax earnings sums — 2016 to Q2 2026 · publ. 2026-09-23 · source ↗
Sources
Generated September 23, 2026