Berkshire Hathaway, the renowned conglomerate helmed by Warren Buffett, has achieved a historic milestone by becoming the first non-technology company in the United States to surpass a $1 trillion market capitalization. This notable achievement comes just days before Buffett, often hailed as the “Oracle of Omaha,” celebrates his 94th birthday, underscoring the remarkable success of his investment strategies.
On Wednesday, Berkshire Hathaway’s stock climbed by 0.8%, closing at $696,502.02 per share and pushing the company’s market value past the $1 trillion mark. This impressive rise further highlights Berkshire’s 28% gain in 2024, significantly outperforming the S&P 500’s 18% growth. The milestone reflects the strength and resilience of Berkshire Hathaway’s diverse portfolio, which includes notable subsidiaries like insurance giant Geico, BNSF Railway, and Dairy Queen.
Cathy Seifert, an analyst at CFRA Research, praised the achievement, stating, “This is a testament to the firm’s financial strength and franchise value.” Unlike tech giants such as Apple, Microsoft, and Amazon, Berkshire Hathaway stands out due to its focus on traditional, old-economy businesses. Buffett transformed the company from a struggling textile manufacturer in the 1960s into a sprawling empire spanning industries including insurance, railroads, retail, manufacturing, and energy. Despite its broad range of investments, Berkshire Hathaway has maintained a robust balance sheet and significant cash reserves, often referred to as a “cash fortress.”
Andrew Kligerman, an analyst at TD Cowen, acknowledged Buffett’s success in managing a conglomerate during an era when specialized firms are more common. “It’s a tribute to Mr. Buffett and his management team,” Kligerman said. “Old economy businesses are what built Berkshire. Yet, these businesses trade at relatively much lower valuations compared to tech companies, which are not a major part of Berkshire’s business mix.”
In a significant leadership shift, Greg Abel, the vice chairman of Berkshire’s non-insurance operations, has been named Buffett’s successor. Abel, 62, is expected to assume decision-making responsibilities once Buffett steps down. At the company’s annual meeting earlier this year, Buffett assured shareholders that Abel would have the final say on investment decisions.
Recently, Buffett has adopted a more defensive stance, selling a substantial portion of Berkshire’s Apple holdings and increasing the company’s cash reserves to a record $277 billion as of June. This strategy has drawn attention from Wall Street analysts, who speculate that Buffett is cautious about the current economic environment and market valuations.
Additionally, Berkshire Hathaway began a selling spree of Bank of America shares in mid-July, offloading over $5 billion worth of stock. Buffett had initially invested in BofA’s preferred stock and warrants in 2011 to support the lender during the financial crisis, but the recent sale indicates a shift in strategy.
Despite these adjustments, Berkshire Hathaway continues to perform robustly, buoyed by strong second-quarter earnings. UBS analyst Brian Meredith recently raised his earnings estimates for 2024 and 2025, citing higher investment income and improved underwriting results at Geico and other insurance units. Meredith also increased his 12-month price target for Berkshire’s Class A shares to $759,000, reflecting confidence in the company’s future performance.
Berkshire Hathaway’s Class A shares remain among the most expensive on Wall Street, a strategy Buffett has maintained to attract long-term, quality-oriented investors. In 1996, the company introduced Class B shares to make Berkshire more accessible to smaller investors. As Berkshire Hathaway solidifies its place in financial history, this milestone is not only a tribute to Buffett’s legacy but also a testament to the enduring appeal of its business model in a rapidly evolving market.
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