In Latest Value Stock Triumph, Berkshire Hathaway Shares Close at Record Highs

Berkshire Hathaway shares climbed to record highs, driven by increasing interest in value stocks. Both Class A (BRK.A) and Class B (BRK.B) shares of Berkshire Hathaway reached unprecedented closing highs, marking their highest levels since March 28, as per Dow Jones Market Data. This surge comes after four consecutive days of gains, the longest winning streak since May.

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This uptick in Berkshire shares aligned with strong performances from the S&P 500 Value Index (IVE) and the Russell 1000 Value Index (RLV). Exchange-traded funds (ETFs) tracking these indexes rose by 2.5% and 2.8% respectively this week, indicating a breakout for value stocks after a stagnant period since March. The S&P 500 value index outperformed its growth counterpart by 2.5 percentage points, increasing by 2.3%, while growth stocks declined by 0.1%. This was the best relative performance for value stocks since April 19, according to Dow Jones Market Data.

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Berkshire Hathaway's shares are significant holdings in ETFs that track both the Russell 1000 and S&P 500 value indexes. Recent trading activity has encouraged bullish investors, suggesting that a previously concentrated stock-market rally could broaden as more stocks participate.

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Over the past year, a small group of companies drove most of the gains in the S&P 500 and Nasdaq Composite. This trend intensified in June, causing concern among strategists and portfolio managers as the S&P 500 rose while its average constituent declined. However, this dynamic shifted on Thursday with favorable inflation data, raising hopes for a Federal Reserve pivot to rate cuts. As a result, the S&P 500 fell, many leading stocks dropped, but about 80% of the index's members saw gains.

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Friday's trading session continued this broad rally, including top-performing stocks from 2024. This performance has bolstered hopes that value stocks can continue their rally without negatively impacting growth-oriented peers. If value stocks were to pull back, the S&P 500 would likely decline, noted Kevin Gordon, senior investment analyst at Charles Schwab & Co., in an interview with MarketWatch. However, Gordon doesn't see the market as a zero-sum game. He believes the recent inflation data has provided a boost to the value trade, which is essential for maintaining the bull market.

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Ryan Detrick, chief market strategist at Carson Group, also sees the easing inflation data as positive for stocks overall. He anticipates that potential interest-rate cuts by the Federal Reserve, possibly starting in September, could spark a long-awaited rotation in market leadership. This would likely benefit financials, industrials, and small- to mid-cap stocks, without undermining the crucial technology stocks, Detrick explained. He views this broadening out as the next phase of the bull market.

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Returning to Berkshire, the company's latest stock-market record follows a turbulent period for its shares. In early June, a trading glitch briefly showed Berkshire's Class A shares plummeting by over 99.97%. Additionally, the underperformance of Apple Inc. (AAPL) shares had been a burden for Berkshire, which reduced its stake in Apple during the first quarter, according to Doug Kass, president and founder of Seabreeze Partners.

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However, Apple has rebounded strongly, with shares rising nearly 20% since unveiling new AI-enhanced features on June 10. Apple remains Berkshire's largest equity holding, accounting for over 44% of its portfolio. The value of Berkshire's Apple stake has surged by nearly $50 billion since May 1, as calculated by MarketWatch.

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Berkshire also benefited from a rally in financial stocks this week. The Financial Select Sector SPDR Fund (XLF) rose 2% this week, closing at a record high, according to data. The ETF has gained 12.7% this year, with Berkshire being its largest holding. Besides its large insurance operations, Berkshire holds significant positions in financial firms like Bank of America Corp. (BAC) and American Express Co. (AXP), which make up 10.5% and 8.8% of its portfolio, respectively. Other notable holdings include stakes in Citigroup Inc. (C), Capital One Financial Corp. (COF), and Chubb Ltd. (CB).

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By the end of Friday's session, Berkshire's Class A shares had risen by 17.9% in 2024, while its Class B shares were up 19%, according to FactSet data. In comparison, the S&P 500 had increased by 17.7%.

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