Berkshire Moves Toward $1 Trillion Valuation After Results

Shares of Berkshire Hathaway Inc. achieved another record high on Monday, bringing the conglomerate's market value closer to the $1 trillion mark. The Omaha-based firm, led by Warren Buffett, reported increased operating earnings, contributing to the stock's ascent toward the trillion-dollar club. If Berkshire surpasses this level, it would be the first non-technology US company to achieve such a significant market capitalization.

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The shares experienced a notable 3.1% increase, marking the most substantial one-day jump since August and briefly elevating Berkshire's market capitalization above $925 billion. Having already gained nearly 15% in the previous year, the stock was up approximately 17% in 2024 as of the end of Friday.

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In his annual letter to shareholders, Buffett emphasized the company's commitment to "extreme fiscal conservatism" as a corporate pledge. He stated that Berkshire is built to last, highlighting the conglomerate's resilience and long-term perspective.

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Berkshire Hathaway reported fourth-quarter operating earnings of $8.48 billion, a notable increase from $6.63 billion in the same period the previous year. This boost was attributed to higher insurance underwriting earnings and increased investment income, supported by higher interest rates and milder weather conditions.

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Bloomberg Intelligence analyst Matthew Palazola noted that Berkshire Hathaway's diverse business units position it well to maintain its earnings power, even in the face of economic uncertainties. The conglomerate's businesses span various sectors, including insurance, railroads, and ice cream, providing a stark contrast to technology-focused companies with similar valuations.

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Berkshire's stock is traded in two classes: Class B, the more heavily traded, priced at over $400 per share, and Class A, which changes hands above $600,000. The company's diverse portfolio sets it apart from tech giants that currently command high valuations.

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While several US-based companies have achieved market capitalizations above a trillion dollars, Berkshire Hathaway remains among the closest to this milestone outside of the technology sector. However, it faces competition from other industries, with Eli Lilly & Co., a biopharmaceutical company, prompting analyst speculation about the potential to become the first $1 trillion company in its sector.

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Despite Berkshire's stock gains, its sheer size poses challenges for significant deal-making. Buffett acknowledged in his letter that only a handful of companies in the country are capable of truly impacting Berkshire due to its vast scale. The conglomerate's cash hoard has reached a record $167.6 billion, reflecting its struggle to find attractive transactions amid high valuations.

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UBS analyst Brian Meredith expressed a positive outlook on Berkshire, considering it an attractive stock in an uncertain macro environment. However, Buffett cautioned that eye-popping performance should not be expected, emphasizing the conglomerate's focus on long-term stability and value.

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