On Wednesday, August 28, the conglomerate of renowned investor Warren Buffet, Berkshire Hathaway Inc., became the first US corporation outside the IT industry to surpass $1 trillion in market value. The company’s market capitalisation crossed the trillion-dollar threshold for the first time due to a 0.8% increase in shares.
With a rebound that has outperformed the S&P 500’s gains this year, Berkshire Hathaway is off to one of its finest annual starts in ten years. Strong insurance earnings and expectations about economic expansion have caused the stock to rise 30% in 2024, while the market benchmark has only increased by 18%.
The market capitalisation of the shares increased by more than $200 billion just this year, setting a record for the company that was strikingly different from Nvidia’s nearly $2 trillion gain. The relative strength indicator indicates that Berkshire’s recent gain has moved it into overbought territory.
The company, which is headquartered in Omaha, Nebraska, joins the club of businesses that have achieved the milestone; this group is led by IT behemoths like Nvidia Corp., Meta Platforms Inc., and Alphabet Inc. The so-called “Magnificent Seven,” a measure of the largest tech stocks, has increased by 35% this year, and Berkshire is not far behind them.
Buffett has dedicated most of his life to transforming Berkshire Hathaway from a small textile company into a vast conglomerate. Alongside his long-time business colleague Charlie Munger, who passed away in November at the age of 99, he helped define the corporation.
From 1965 until last year, Berkshire’s market value increased by almost 20 per cent annually, or about twice the annual return of the S&P 500. As a result, Buffett became the wealthiest person on the planet and the most successful investor in history.
The strength of the conglomerate coincides with growing economic optimism, as the US Federal Reserve is predicted to lower interest rates at its September meeting. In August, consumer confidence reached a six-month high.
Reduced interest rates may affect returns on Berkshire’s record cash pile, which it accumulated by selling its shares in Apple Inc. and reducing its stakes in Bank of America Corp. According to second-quarter figures released in early August, Buffett’s cash position was approximately $276.9 billion.
Buffett once referred to Apple as the “pillar” of Berkshire Hathaway’s business, thus Berkshire Hathaway’s decision to sell off a sizable portion of the iPhone manufacturer is noteworthy. The Oracle of Omaha now has about $280 billion in cash as a result of the stake sale. According to Apple CEO Tim Cook, having Berkshire as a significant stakeholder is still a privilege.
The previous quarter saw a record profit for Berkshire Hathaway, which was mostly driven by a rise in revenue from insurance underwriting. Operating profit for the first quarter increased by 39% to $11.22 billion, or around $7,807 per Class A share, compared to $8.07 billion in the same period last year.
The international conglomerate’s earnings dropped from $35.5 billion, or $8,838 per share, to $12.7 billion, or $12.7 billion when Berkshire had significant unrealised equity gains. Buffett advises investors to ignore the resultant volatility as a result of Berkshire having to publish the unrealised gains and losses with the net earnings due to an accounting rule.
In the first quarter, Berkshire also bought back $2.6 billion of its shares, and in the first three weeks of April, it bought back a smaller chunk of shares. After the first quarter, the company’s hoard surpassed the record it had established at the end of the previous year, reaching $189 billion.
