A Reflection on the Berkshire Hathaway Annual Report: The Case for Share Repurchases

Berkshire Hathaway (BRK.A / BRK.B) paid $13.6 billion across three separate transactions to acquire Pilot Travel Centers, a chain of truck stops. It may have seemed like a "cigar butt" bet since we all know that hydrocarbon fuels have much greater longevity than many had assumed. But the results have been painful. Pilot earned nearly $1 billion in pre-tax income in 2023, then $614 million in 2024, and just $190 million last year (2025 annual report): a decline of 69% in a single year. On the cumulative $13.6 billion investment, that's a return of roughly 1.4%.

Berkshire's annual report explains the deterioration: revenues fell $4.7 billion (10%) in 2025, driven by lower wholesale fuel volumes, reduced fuel trading activity, weaker fuel prices, and margin compression across both wholesale and in-store operations. Those declines were compounded by rising employee compensation, insurance, and maintenance costs. In short, nearly everything that could go wrong did.

To put a value on what Berkshire currently holds: Murphy USA (MUSA), a publicly traded gas station chain and a natural comparable to Pilot, trades at roughly 16 times earnings. Applying that multiple to Pilot's $190 million in 2025 earnings implies Pilot may be worth only around $3 billion today: a loss of more than $10 billion from the $13.6 billion Berkshire invested.

Now consider the alternative. Had Berkshire used those same dollars to repurchase its own shares at the time of each transaction, the math is stark. The $2.76 billion first tranche, invested in October 2017, would be worth roughly $7.4 billion today (+167%). The $8.2 billion second tranche, deployed in January 2023, would have grown to approximately $13.3 billion (+62%). The $2.6 billion third tranche, purchased in January 2024, would now be worth approximately $3.6 billion (+40%). 

In total, the $13.6 billion spent on Pilot, if instead used to repurchase Berkshire shares, would be worth roughly $24.3 billion today, compared to an estimated current value of ~$3 billion for the Pilot stake. The estimated opportunity cost exceeds $21 billion.

And the financial cost is only part of the picture. Operating a business like Pilot demands something that doesn't show up on a balance sheet: management attention. Every struggling subsidiary creates meetings, reporting structures, remediation plans, and distraction at the senior-most levels of the organization. Share repurchases, by contrast, require none of that. There is no additional SG&A, no new organizational layer, no operational complexity; just a straightforward allocation of capital into a business management already understands deeply.

New Berkshire CEO Greg Abel addressed the Pilot situation directly in this year's annual report, writing: "We should be #1 and we will not be pleased until that standard is achieved. We first invested in Pilot in 2017; however, our ability to manage it was contractually delayed until 2023. That mistake will not happen again." 

That Abel, who is responsible for overseeing one of the largest and most complex enterprises in the world, is personally focused on fixing the performance of a tiny operating subsidiary speaks to exactly this cost. The opportunity cost of managerial distraction is real, even if it's impossible to quantify precisely.

It goes to show that management teams (even one of the best capital allocators in history!) consistently underestimate the value of repurchasing their own shares.