Warren Buffett’s Berkshire Hathaway hits $1 trillion market value, becoming the first non-tech U.S. company to reach that mark

Warren Buffett’s Berkshire Hathaway On Wednesday, the company’s market value reached $1 trillion, becoming the first non-tech company in the United States to reach that coveted milestone.

Shares of the Omaha, Nebraska-based conglomerate have risen more than 28% in 2024, far outpacing the 18% gain in the S&P 500. The market cap passed the $1 trillion threshold just two days before what would have been the Oracle of Omaha’s 94th birthday.

The stock rose more than 1% on Wednesday to a high of $699,699, pushing its market value above the $1 trillion mark, according to FactSet data.

Berkshire analyst Cathy Seifert of CFRA Research said the milestone is “a testament to the company’s financial strength and franchise value. Berkshire is one of the few remaining conglomerates today and this milestone is significant.”

Unlike the other six companies in the trillion-dollar club (Apple, Nvidia, Microsoft, Alphabet, Amazon, and Meta), Berkshire Hathaway is known for its focus on the old economy, as it owns BNSF Railway, Geico Insurance and Dairy Queen(Though its stake in Apple has surged, helping to drive recent gains.)

BuffettChairman and CEO, controls Berkshire, In the 1960s, the company transformed itself from a struggling textile business into a sprawling conglomerate with interests in insurance, railroads, retail, manufacturing and energy, with an unrivaled balance sheet and fortress of cash.

“It’s a tribute to Mr. Buffett and his management team that ‘old economy’ businesses … are the bedrock of Berkshire. However, valuations for these businesses are much lower, and tech companies are not a major component of Berkshire’s business,” said Andrew Kligerman, a Berkshire analyst at TD Cowen. “In addition, Berkshire has achieved this through a conglomerate structure, a model that many view as ‘outdated’ as businesses have increasingly moved toward specialization over the decades.”

Greg Abel, vice chairman of Berkshire’s non-insurance businesses, has been named Buffett’s successor. At this year’s annual shareholder meeting, Buffett told shareholders that Abel, 62, will have the final say over Berkshire’s investment decisions after he is no longer at the helm.

Sales boom

Buffett has been in defensive mode lately. Sold a large number of stocks, including half of Apple sharesMeanwhile, Berkshire’s cash reserves reached a record $277 billion as of the end of June.

Buffett is known to never predict market moves and advises others not to try to do so, but the recent moves have raised alarm bells for some of his Wall Street followers, who believe Buffett sees something he doesn’t like about the economy and market valuations.

Berkshire Hathaway invests most of its cash in short-term Treasury bills, with its holdings of such securities valued at $234.6 billion at the end of the second quarter. More than the amount held by the Federal Reserve.

It’s hard to tell, therefore, why investors are plowing $1 trillion into Berkshire Hathaway today, whether it’s because they’re bullish on the U.S. economy and how Buffett’s sprawling conglomerate will benefit if it continues to be healthy, or whether they see Berkshire Hathaway as a cash fortress that can generate steady income amid an uncertain macro environment.

The conglomerate also embarked on a sales spree Bank of America In mid-July, Buffett sold more than $5 billion worth of Bank of America stock. Buffett bought preferred shares and warrants in the bank after the 2011 financial crisis, boosting confidence in the troubled bank, which was struggling with losses related to subprime mortgages.

Strong earnings

After Berkshire Hathaway reported strong earnings for the latest quarter, UBS analyst Brian Meredith raised his earnings forecasts for 2024 and 2025, citing two reasons: higher investment income and improved underwriting results at the insurance group, which includes Geico. Insurance stocks have soared this year as the group continues to raise prices after the pandemic.

Meredith expects Berkshire’s market value to well exceed $1 trillion and raised its 12-month price target for the A shares to $759,000, nearly 9% above Wednesday’s level.

“We continue to believe BRK shares are attractive amid an uncertain macro environment,” he wrote in a note earlier this month.

Expensive

Berkshire’s original Class A stock One of the highest prices on Wall StreetToday, the price per piece is Average price of a home in the U.S.

That’s because Buffett has never split his stock, believing that high share prices can attract and retain more long-term, quality-focused investors. Benjamin Graham The protégé once said that many Berkshire shareholders treat their stocks like savings accounts.

Despite this, Berkshire issued Class B Shares In 1996, Buffett issued the stock at one-thirtieth the price of Class A shares to meet the needs of small investors who wanted to share in Buffett’s performance.