Buffett's Berkshire hits $1 trillion valuation, first non-tech US firm

Ace investor Warren Buffet's conglomerate Berkshire Hathaway Inc. became the first US company outside the tech sector to surpass $1 trillion in market value, on Wednesday. Shares rose as much as 0.8 percent to push the company's market capitalisation above the trillion-dollar mark for the first time. 

Berkshire Hathaway's rally this year has outpaced the S&P 500’s gains, with the company off to one of its best annual starts in a decade. The stock has rallied 30 percent in 2024 on strong insurance results and economic growth optimism, while the market benchmark is up 18 percent so far.

Nearing 'Magnificent Seven'

The stock has added more than $200 billion in market capitalisation this year alone—a record for the firm but a sharp contrast to Nvidia’s nearly $2 trillion increase. Based on the relative strength index, Berkshire’s rally has pushed it into overbought territory.

The Omaha, Nebraska-based conglomerate joins the group of companies to crack the milestone, dominated by technology giants like Alphabet Inc., Meta Platforms Inc., and Nvidia Corp. Berkshire is not far behind the so-called ‘Magnificent Seven’, which is a gauge of the biggest tech stocks—up 35 percent this year.

Mr Buffett has spent most of his life turning Berkshire Hathaway from a textile maker into a sprawling business empire. He shaped the company alongside longtime business partner Charlie Munger, who died in November at age 99.

20% hike every year for over half-century

Berkshire’s market value climbed by roughly 20 percent a year from 1965 through last year — nearly double the S&P 500’s annual return. That turned Buffett into one of the richest people in the world and the most prolific investor ever.

The conglomerate’s strength comes as optimism for the economy builds, with the US Federal Reserve expected to cut interest rates at its September meeting. Consumer confidence rose to a six-month high in August. 

Lower interest rates could impact returns on Berkshire's record cash pile, which it amassed while slashing its Apple Inc. stake and paring its Bank of America Corp. holdings. In the second quarter, results reported in early August showed that Mr Buffett's cash pile stood at about $276.9 billion. 

Buffett halves stake in Apple

Selling off a large share of Apple Inc is a significant move for Berkshire Hathaway, as Mr Buffett used to call Apple the pillar of Berkshire's business. The stake sale increased the Oracle of Omaha's cash holdings to almost $280 billion. Apple CEO Tim Cook has said that he still considers it a privilege to have Berkshire as a major shareholder.

Berkshire Hathaway last reported a record quarterly profit, boosted by a significant increase in income from insurance underwriting. The first-quarter operating profit rose 39 percent to $11.22 billion, or about $7,807 per Class A share, from $8.07 billion a year earlier.

The multinational conglomerate's income fell to $12.7 billion or $8,838 per share from $35.5 billion when Berkshire had large unrealised gains from its stocks. An accounting rule requires Berkshire to report the unrealised gains and losses with the net results, and Mr Buffett urges investors to ignore the resulting volatility.

Berkshire also repurchased $2.6 billion of its own stock in the first quarter and a small amount in the first three weeks of April. The firm’s hoard increased to $189 billion at the end of the first quarter, topping the record it set at year-end.

                                                    (By arrangement with livemint.com)