The company's stocks have climbed 30% in 2024, outperforming the S&P 500's gain of 18% so far.
Warren Buffett's Berkshire Hathaway has achieved a significant milestone, becoming the first U.S. company outside the technology sector to exceed a $1 trillion market capitalization. This accomplishment underscores the conglomerate's remarkable growth and resilience in an economy often dominated by tech giants.
On Wednesday, Berkshire Hathaway’s shares rose by 0.8%, pushing its market value past the trillion-dollar mark for the very first time. This surge is a testament to the company's strong performance in 2024, with its stock price climbing 30% so far this year—significantly outperforming the S&P 500, which has gained 18% in the same period. The growth in Berkshire’s market capitalization this year alone has added over $200 billion to its value, setting a new record for the company.
However, this achievement contrasts sharply with the nearly $2 trillion increase in market value seen by Nvidia, another market powerhouse. Based in Omaha, Nebraska, Berkshire Hathaway now joins an exclusive club of companies that have reached a $1 trillion valuation—a group that includes major tech players such as Alphabet Inc., Meta Platforms Inc., and Nvidia Corp.
While Berkshire Hathaway isn't a tech firm, its stock performance in 2024 isn't far behind that of the so-called "Magnificent Seven," a group of top-performing tech stocks, which have risen 35% this year.
The Legacy of Warren Buffett
Warren Buffett, widely regarded as one of the greatest investors of all time, has spent decades transforming Berkshire Hathaway from its origins as a struggling textile manufacturer into a vast business empire. He accomplished this alongside his longtime business partner, Charlie Munger, who passed away in November at the age of 99.
Under Buffett’s leadership, Berkshire Hathaway’s market value has grown at an average annual rate of around 20% from 1965 through 2023—nearly double the average return of the S&P 500. This consistent performance has not only made Buffett one of the world's wealthiest individuals but has also solidified his reputation as a master investor.
Economic Optimism and Financial Performance
The recent rise in Berkshire’s market value reflects increasing optimism about the U.S. economy. Consumer confidence reached a six-month high in August, buoyed by expectations that the Federal Reserve might cut interest rates during its September meeting. However, lower interest rates could impact returns on Berkshire's significant cash reserves, which stood at about $276.9 billion at the end of the second quarter.
A significant portion of these reserves was accumulated after Berkshire reduced its stake in Apple Inc., a move that surprised many, considering Apple has long been regarded as a core part of Berkshire’s investment portfolio. Despite this reduction, Apple CEO Tim Cook has expressed that it remains a privilege for Apple to have Berkshire as a major shareholder.
Strong Financial Results Amid Market Volatility
Berkshire Hathaway’s robust financial performance further underscores its market strength. The company posted a record quarterly profit in the first quarter of 2024, driven by a substantial increase in income from its insurance underwriting business. Operating profit for the quarter rose by 39% to $11.22 billion, or about $7,807 per Class A share, up from $8.07 billion a year earlier.
Despite these gains, Berkshire’s net income for the quarter fell to $12.7 billion, or $8,838 per share, down from $35.5 billion in the same period last year. This decline was largely attributed to an accounting rule that requires the company to report unrealized gains and losses on its stock investments, creating considerable volatility in its financial results. Buffett has consistently advised investors to focus on the company’s long-term performance rather than these short-term fluctuations.
Additionally, Berkshire continued its strategy of repurchasing its own stock, buying back $2.6 billion worth of shares in the first quarter and a small amount in early April. As a result, the company's cash reserves rose to $189 billion by the end of the first quarter, surpassing the previous record set at the end of last year.
A Historic Milestone for Berkshire Hathaway
Berkshire Hathaway’s $1 trillion milestone is a testament to the company’s enduring strength and Warren Buffett’s strategic vision. As the first non-tech U.S. company to achieve this valuation, Berkshire Hathaway has firmly established its position among the world’s most valuable companies.
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