Warren Buffett’s Berkshire Hathaway surges past $1 trillion market value

Warren Buffett has transformed his sprawling conglomerate. Photo / Getty Images

Warren Buffett’s Berkshire Hathaway became the first publicly traded US company outside the technology sector to be valued at US$1 trillion, as a small advance on Wednesday pushed its market capitalisation into a club that had been dominated by companies such as Apple and target="_blank">Microsoft.

The sprawling conglomerate has been transformed by Buffett over the past six decades into a force touching almost every corner of the American economy. Its rail cars traverse more than 32,000 miles of track that criss-cross the country, it owns a critical parts manufacturer for Boeing, and it runs one of the largest US auto insurers.

Buffett, who turns 94 on Friday, has spent the year selling off stocks – including half of the stake in Apple that generated a mammoth trading profit for Berkshire – and pumping the proceeds into cash and short-term Treasuries.

Shareholders have rewarded Berkshire, pushing its valuation up by more than US$200 billion this year. Its class A common stock is up nearly 30 per cent since the start of January, outpacing the broader S&P 500. The A shares stood at US$694,000, up 0.4%, in early afternoon trading on Wednesday.

Jeff Muscatello, a research analyst at Berkshire investor Douglass Winthrop, said the rise since Buffett took control of the company in 1965 was down to “the consistency of their approach” as well as Buffett’s investing rules.

“The first [rule] is don’t lose money,” Muscatello said. “The second is don’t forget rule number one and let the laws of compounding work over an incredibly long period of time.”

The surging valuations in Berkshire’s shares and the wider stock market have not been lost on Buffett. The billionaire in May slowed the company’s share buyback programme and disclosed in June that he had not repurchased a single share that month.

Buffett has sole discretion over the buyback programme and generally curtails buying when he believes the stock is overvalued.

The company’s cash pile soared to a record high of US$277b in June as Buffett found few appealing investments in public markets. While periods of relatively sparse dealmaking have troubled Berkshire investors in the past, few are ringing alarm bells now, as the company looks to have avoided some of the troubles that have befallen private equity buyers who were active in 2020 and 2021.

“Building the cash position ... when I look at the alternative of what’s available in the equity markets and I look at the composition of what’s going on in the world, we find it quite attractive,” Buffett told the company’s annual meeting in May.

Buffett first invested in Berkshire in 1962, taking control of the struggling textile maker three years later. Over the following decades, he and his late-partner Charlie Munger turned the company into an insurance behemoth and used policy premiums as the source of capital to buy up companies and invest in stocks.

The business now encompasses a US$285b stock portfolio, Duracell batteries, a US$141b utility company, ice-cream purveyor Dairy Queen and paint-maker Benjamin Moore, along with dozens of other companies.

Buffett has anointed longtime Berkshire executive Greg Abel as his heir apparent.

Written by: Eric Platt in New York

© Financial Times