Warren E. Buffett’s Berkshire Hathaway climbed past a market valuation of $1 trillion on Wednesday, joining a small club of mammoth companies dominated by tech firms like Nvidia and Microsoft.
Berkshire’s shares rose 0.7 percent on Wednesday, bringing their gain this year to more than 28 percent and adding more than $200 billion to the company’s market capitalization — a rally that has outpaced the broader market’s rise. The S&P 500 is up 17.2 percent for the year.
Berkshire owns and controls firms like the insurance giant GEICO and the Burlington Northern Santa Fe railroad, and holds stakes in many blue-chip companies like Apple and Coca-Cola. The conglomerate’s ascent further entrenches Mr. Buffett’s reputation as one of the most successful investors of all time, with Berkshire averaging a gain of about 20 percent a year since he took the helm in 1965.
Reaching a $1 trillion market valuation is “a big deal,” said Kevin Heal, an analyst who covers the company for Argus Research, adding that the threshold “goes to show the long-term performance” of Berkshire and Mr. Buffett.
Every year, Berkshire holds its shareholder meeting in Omaha, where tens of thousands of people pack an arena to hear Mr. Buffett’s folksy investing wisdom. This year’s meeting, in May, was the first without Mr. Buffett’s longtime foil at Berkshire, Charles T. Munger, the firm’s vice chairman, who died in November at age 99.
Mr. Buffett, who turns 94 on Friday, and Mr. Munger built Berkshire’s fortune by adhering to what’s known as value investing: ignoring fads and seeking undervalued companies to invest in for the long term. Mr. Buffett broke it down in 1986 in what has become a much-repeated quote: “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”
Berkshire’s big bets on Apple, another company with a $1 trillion market cap, as well as financial companies like Bank of America and American Express, have paid off handsomely this year.
Exuberance over artificial intelligence has helped drive some big tech stocks — and the broader market — higher while improving confidence in the economy, and the Federal Reserve’s ability to lower inflation without causing a more severe downturn has helped companies that typically rise and fall along with economic sentiment, like banks.
Apple has risen 18 percent since January, and even after Berkshire sold a large chunk of its stake in the company in the second quarter the tech company remained Berkshire’s largest holding, according to filings. Berkshire is also sitting on more than $270 billion in cash, giving Mr. Buffett considerable resources to put toward other investments.
That might explain why Berkshire has managed to outpace the rise of the S&P 500 this year, though it’s still not wholly clear, said Greggory Warren, an analyst who covers the company for Morningstar. Berkshire, he noted, is normally considered a defensive stock — one that might fare better than the broader market in times of turmoil.
“I, unfortunately, don’t have an answer as to why it is up as much as it is, other than that perhaps some market participants weren’t buying into the tech-driven rally and wanted the downside protection of a Berkshire if things went south, or some thought Berkshire would benefit from A.I. through its large Apple stake,” he said.
Bank of America, Berkshire’s second-largest holding at the end of the second quarter, has risen almost 20 percent in 2024, while American Express, its third largest, has climbed nearly 40 percent. Berkshire has been selling shares in Bank of America, recent filings show.
The prospect of interest rate cuts beginning in September is seen as a positive for banks because they will be able to borrow more cheaply for short periods while still earning higher interest rates on longer-term loans like mortgages.
However, that same drop in rates could punish Berkshire’s hefty cash holdings, which have largely been invested in short-term government debt.
“If anything, the firm should be facing some headwinds as the Fed looks set to start on its easing cycle next month,” Mr. Warren said.
Coca-Cola, another beneficiary of a resilient economy and continued consumer spending, has risen over 20 percent this year.
Rounding out Berkshire’s top five holdings is Chevron, pointing to the more mixed picture for Mr. Buffett’s bets on oil companies. The price of Brent crude, the international benchmark, has nudged only slightly higher this year, with Chevron dipping roughly 2 percent over the same period.
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