Berkshire Hathaway, under the leadership of Warren Buffett, has recently broken through a significant landmark, becoming the first US public company, outside of the technology industry, to achieve a market valuation of $1 trillion. The difference in this case is that previously, this valuation milestone was only reached by technology heavyweights such as Apple and Microsoft.
For over 60 years, Mr Buffett has transformed this wide-ranging business empire, weaving it into the fabric of the US economy. Its breadth is significant, with its rail cars covering an impressive 32,000 miles of interconnected rail track throughout the nation. Additionally, it is a crucial supplier for Boeing and operates as one of the largest auto insurers in the US.
Despite nearing his 94th birthday, Mr Buffett has been rather active this year trading stocks – even divesting half of his holdings in Apple, a move that previously accumulated massive trading profits for Berkshire and subsequently investing the gains in cash and short-term US treasury notes.
Berkshire Hathaway’s performance has not gone unnoticed, with shareholders rewarding the company, pushing its market valuation up by over $200 billion this year. Its class A common shares have seen a significant increase at around 30 per cent since early January, outperforming the broader S&P 500.
Research analyst, Jeff Muscatello from Berkshire investor Douglass Winthrop, recognises Mr Buffett’s steady strategy and investing doctrines for the company’s solid performance since taking the reins in 1965. He stipulates Buffett’s two cardinal investing principles: firstly, to not lose money and secondly, to not forget the initial rule and to allow compound growth to take effect over an extended time period.
Mr Buffett has remained astute amidst soaring share prices. In fact, the billionaire slowed down the company’s share buyback programme earlier this year. Furthermore, he announced in June that no shares have been repurchased within the month, a decision solely up to his discretion, generally made when he perceives the stock as overvalued.
The corporation’s monetary reserves reached an unprecedented level of $277 billion this past June, due to Mr. Buffett’s inability to identify worthwhile investment opportunities in public markets. Historically, Berkshire’s infrequent deal making has presented problems for investors. Currently, however, there is minimal concern as Berkshire seems to have evaded the issues typically experienced by private equity buyers throughout 2020 and 2021.
During the company’s annual congregation in May, Mr. Buffett articulated his satisfaction with bolstering the cash reserves, underlining that this strategy appeared particularly appealing when compared with the prevailing equity market conditions and worldwide occurrences.
Mr. Buffett’s initial investment in Berkshire took place in 1962. A mere three years later, he took the reins of the then-floundering textile manufacturer. Over the subsequent years, in collaboration with his late-partner, Charlie Munger, the duo transformed Berkshire into a mammoth in the insurance realm. Predominantly, they utilized policy premiums as capital, enabling them to acquire various companies and make stock investments.
Berkshire’s business operations now comprise of a wide-ranging $285 billion stock portfolio that includes, among other businesses, Duracell batteries, a massive $141 billion utility firm, Dairy Queen – a renowned ice cream vendor and Benjamin Moore, a paint manufacturer.
Finally, Greg Abel, a Berkshire veteran, is tipped by Buffett as the most likely successor – a statement that is certified by The Financial Times.