Warren Buffett | Photographer: Scott Eells/Bloomberg
Berkshire Hathaway Inc. has become the first U.S. company outside the technology sector to reach a market value of more than $1 trillion.
Shares of Warren Buffett’s conglomerate rose as much as 0.8 percent on Wednesday, pushing its market capitalization above the $1 trillion mark for the first time. The stock has risen this year on strong insurance results and economic optimism. The Omaha, Nebraska-based company joins a small group of companies to reach the milestone, dominated by tech giants such as Alphabet Inc., Meta Platforms Inc. and Nvidia Corp.
“Berkshire has done it the slower, surer way,” said Steve Check, founder and chief investment officer of Check Capital Management. His firm manages about $2 billion in assets, with Berkshire as its largest holding. “It’s harder to make money the old-fashioned way.”
Berkshire’s rally this year has outpaced the S&P 500’s gains, giving the company one of its best annual starts in a decade. It’s up 30 percent through 2024, while the market benchmark is up 18 percent. The company isn’t far behind the so-called Magnificent Seven: a benchmark of the largest tech stocks, up 35 percent this year.
Buffett spent most of his life transforming Berkshire Hathaway from a struggling textile manufacturer into a sprawling business empire. He founded the company with his longtime business partner Charlie Munger, who died in November at age 99.
Berkshire’s market value rose about 20 percent a year from 1965 to last year — nearly double the annual return of the S&P 500 over that time. That’s made Buffett one of the richest men in the world, and perhaps the most prolific investor ever.
The conglomerate’s strength comes as optimism for the economy grows, with the Federal Reserve expected to cut interest rates at its September meeting. Consumer confidence rose to a six-month high in August. Berkshire’s holdings range from truck stop operator Pilot Travel Centers LLC to ice cream chain Dairy Queen and battery brand Duracell.
The stock has added more than $200 billion to its market cap this year alone — a record for the company but a stark contrast to Nvidia’s nearly $2 trillion gain. Berkshire’s rally has pushed the company into overbought territory, according to the company’s relative strength index, and has prompted some caution from analysts.
The fundamental outlook for Berkshire’s core businesses isn’t necessarily much brighter, but the company boasts a portfolio that can weather any weather, according to Bloomberg Intelligence analyst Matthew Palazola.
Meanwhile, lower interest rates could hurt returns on the record cash hoard that Berkshire has amassed by reducing its Apple Inc. stake and trimming its Bank of America Corp. holdings. Buffett’s cash hoard stood at about $276.9 billion in second-quarter results reported in early August. The sheer size of the Apple stake had become a concern, Check said, and the move to reduce that exposure was wise. “It took a lot of that risk off the table,” Check said.
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First publication: Aug 28, 2024 | 8:04 PM IST