Berkshire Hathaway reached a market capitalization of $1 trillion on Wednesday morning, becoming the first non-technology company in the U.S. to do so. The milestone is an early birthday present for CEO Warren Buffett, who turns 94 on Friday.
The conglomerate’s Class A shares initially rose by over 1 percent on Wednesday, reaching an all-time high of over $699,000, allowing Berkshire to temporarily break the trillion-dollar mark. They then fell slightly again later in the day. Berkshire has, as is well known, never split the shares. According to data from the St. Louis Fed, they are trading for almost 70 percent more than the average price of a home in the USA.
That’s because Buffett wants to attract investors whose investment horizons align with his buy-and-hold philosophy. Shares have gained 29% since the beginning of the year, compared to just 18% for the S&P 500. But investors can get into Buffett’s portfolio more cheaply with the company’s Class B shares, which also hit an all-time high on Wednesday and are trading above the $462 mark.
Before he became known as the Oracle of Omaha, Buffett bought a struggling New England textile manufacturer in 1965, believing he could get it at a bargain price. It proved to be a failure, but Buffett transformed the company into one of the largest conglomerates in history and made Berkshire a vehicle for his investment philosophy based on value-oriented stock selection and diverse acquisitions.
His approach proved successful. From 1965 to the end of 2022, Berkshire stock rose 3,787,464%, far outperforming the S&P 500’s gain of 24,708%. If you had invested $10,000 in Berkshire 59 years ago, Fortunes Will Daniel noted that at the end of that period you would have earned $378 million.
Old-school Berkshire Hathaway is an isolated case among the big tech players
Berkshire is thus flirting with a club that previously only included the US technology giants and Saudi Aramco, officially the Saudi Arabian Oil Group, the kingdom’s state-owned oil company. Buffett’s conglomerate has the seventh-largest market capitalization in the US, surpassing that of Eli Lily, Broadcom and Tesla.
The technical members of was Fortunes Shawn Tully called the “Billion Dollar Club” and it enjoys incredible dominance in its respective markets. However, their long-term fate seems to be tied to the hundreds of billions of dollars they spend to ensure they remain leaders in the age of artificial intelligence.
Buffett’s company is therefore distinguished by its traditional holdings. Berkshire’s most important property is Geico Insurance, and it also owns household names such as Duracell, Fruit of the Loom, Dairy Queen and BNSF Railway. Buffett is revered for his value-based approach, which typically favors companies such as Coca-Cola and American Express over Big Tech, and his company owns more short-term Treasury bonds than the Federal Reserve.
Still, it’s worth noting that Apple makes up about 40% of Berkshire’s portfolio, remaining the company’s largest holding even after Buffett made headlines by recently unloading nearly half of his position in the iPhone maker. The sell-off, which netted the bulk of Berkshire’s $90 billion in sales in the first half of 2024, could go down in history as “one of the best bets of his career,” according to Tully.
Buffett had previously warned that Berkshire’s size could be a hindrance to future earnings, saying the conglomerate was generating more cash ($277 billion, including short-term equivalents, as of last quarter) than it could appropriately deploy.
So far, however, he and his investors have had every reason to celebrate.
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