Berkshire Hathaway Becomes First U.S. Company Outside of Tech to Reach $1 Trillion in Market Value

Warren Buffett’s Berkshire Hathaway reached a major milestone on Wednesday by crossing the $1 trillion market capitalization mark, becoming the first U.S. company outside the technology sector to achieve this distinction. This notable event occurred just days before Buffett’s 94th birthday, further highlighting the significance of the accomplishment.

‍

In 2024, Berkshire Hathaway's shares have risen by over 28%, outpacing the broader market, where the S&P 500 has gained 18% during the same period. On Wednesday, the stock price climbed by 1.2%, reaching a peak of $699,440.93, according to FactSet, which pushed the company’s market value past the $1 trillion threshold.

‍

Berkshire Hathaway stands out from the other members of the trillion-dollar club—Apple, Nvidia, Microsoft, Alphabet, Amazon, and Meta—due to its focus on traditional, old-economy industries. The company owns businesses like BNSF Railway, Geico Insurance, and Dairy Queen, distinguishing it from the tech giants in the group. Despite this, Berkshire’s substantial investment in Apple has played a significant role in its recent stock price surge.

‍

Buffett took control of Berkshire Hathaway in the 1960s when it was a struggling textile company. Over the decades, he transformed it into a sprawling conglomerate with interests in insurance, railroads, retail, and energy. Today, Berkshire is known for its robust balance sheet and a substantial cash reserve, characteristics that define the company.

‍

Recently, Buffett has taken a more cautious stance, selling a large portion of stocks, including half of Berkshire’s Apple holdings, and growing the company’s cash reserves to a record $277 billion by the end of June. Although Buffett has long advised against market timing, these recent actions have sparked speculation among some Wall Street followers, who believe Buffett might be concerned about the economy and market valuations.

‍

A significant portion of Berkshire’s cash is invested in short-term Treasury bills, with holdings valued at $234.6 billion at the end of the second quarter. Notably, this amount surpasses the U.S. Federal Reserve’s holdings in similar securities. This has led to some debate about why investors have driven Berkshire’s valuation to $1 trillion. Some view it as a vote of confidence in the resilience of the American economy and Berkshire’s diverse portfolio, while others see Berkshire as a safe investment that can provide steady income in an uncertain economic environment.

‍

In addition to building up its cash reserves, Berkshire has been active in the stock market. In mid-July, the company began selling shares of Bank of America, offloading more than $5 billion worth of stock. Buffett initially acquired Bank of America’s preferred stock and warrants in 2011 during the financial crisis, helping to restore confidence in the bank as it struggled with losses tied to subprime mortgages.

‍

Berkshire’s strong performance in the second quarter further reinforced its market position. UBS analyst Brian Meredith recently raised his earnings forecasts for 2024 and 2025, citing increased investment income and better underwriting results from Berkshire's insurance division, including Geico. Insurance stocks have performed well this year, as the industry continues to raise prices in the wake of the pandemic. Meredith believes Berkshire’s market value could rise even higher, setting a 12-month price target of $759,000 for the Class A shares, which is nearly 9% higher than Wednesday’s levels.

‍

Meredith also highlighted in a recent report that Berkshire’s shares remain an attractive investment amid the current uncertain macroeconomic conditions. This reflects the broader confidence investors have in Berkshire’s ability to successfully navigate economic challenges.

‍

One of the unique characteristics of Berkshire Hathaway is the high price of its original Class A shares, which are among the most expensive on Wall Street. Currently, each share costs 68% more than the median price of a U.S. home. Buffett has resisted splitting the stock, arguing that the high share price attracts long-term, quality-focused investors. He has often mentioned that many Berkshire shareholders treat their stock as a savings account, showing their trust in the company’s long-term stability and growth.

‍

In 1996, however, Berkshire introduced Class B shares, priced at one-thirtieth of a Class A share, to cater to smaller investors who wanted a piece of the company without the hefty cost of Class A shares. This decision has allowed a wider range of investors to benefit from Buffett’s successful stewardship of the company, further solidifying Berkshire’s reputation as a dependable investment.

‍

In summary, Berkshire Hathaway’s achievement of a $1 trillion market capitalization underscores Warren Buffett’s exceptional leadership and the company’s enduring success across various industries. As it continues to grow, Berkshire remains a symbol of stability and resilience in an ever-changing economic landscape.

‍