Berkshire Hathaway becomes first US non-tech firm to hit $1 trillion market cap 

Berkshire Hathaway, the Omaha-based conglomerate led by Warren Buffett, has achieved a significant milestone by becoming the first non-technology company in the United States to reach a $1 trillion market capitalization. This achievement comes just days before Buffett, often referred to as the "Oracle of Omaha," celebrates his 94th birthday as detailed by CNBC in a report.

The company's stock surged by 0.8 per cent on Wednesday, closing at $696,502.02 per share, which pushed its market value past the $1 trillion mark. This impressive rise adds to Berkshire's 28 per cent gain in 2024, outpacing the S&P 500's 18 per cent growth. The milestone underscores the strength and resilience of Berkshire Hathaway's diverse business portfolio, which includes insurance giant Geico, BNSF Railway, and Dairy Queen.

Cathy Seifert, an analyst at CFRA Research, highlighted the significance of this achievement in a conversation with CNBC. "This is a testament to the firm's financial strength and franchise value," she said. Unlike other members of the trillion-dollar club such as Apple, Microsoft, and Amazon, Berkshire Hathaway is distinguished by its focus on traditional, old-economy businesses.

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Buffett, who took control of the struggling textile company in the 1960s, has since transformed it into a sprawling empire that spans industries including insurance, railroads, retail, manufacturing, and energy. Despite its diverse portfolio, Berkshire Hathaway has maintained a solid balance sheet and significant cash reserves, often referred to as a "cash fortress."

Andrew Kligerman, an analyst at TD Cowen, praised Buffett and his management team for their success in navigating a conglomerate structure in an era where specialization is more common. "It's a tribute to Mr. Buffett and his management team, as 'old economy' businesses are what built Berkshire. Yet, these businesses trade at relatively much lower valuations versus tech companies, which are not a major part of Berkshire's business mix," Kligerman noted.

Greg Abel is named as Buffett's successor

Greg Abel, the vice chairman of Berkshire's non-insurance operations, has been named Buffett's successor. Abel, who is 62, is expected to take over decision-making responsibilities when Buffett steps down. At the company's annual meeting earlier this year, Buffett assured shareholders that Abel would have the final say on investment decisions.

Selling spree in Apple, Bank of America: Buffett's defensive stance?

Recently, Buffett has adopted a more defensive approach, selling off a significant portion of Berkshire's Apple holdings and increasing the company's cash reserves to a record $277 billion as of June. This strategy has caught the attention of Wall Street analysts, some of whom believe Buffett is cautious about the current economic environment and market valuations.

The conglomerate also started a selling spree of Bank of America shares in mid-July, dumping more than $5 billion worth of the bank stock. Buffett bought BofA's preferred stock and warrants in 2011 in the aftermath of the financial crisis, shoring up confidence in the embattled lender struggling with losses tied to subprime mortgages.

Despite these moves, Berkshire Hathaway continues to perform strongly, buoyed by robust second-quarter earnings. UBS analyst Brian Meredith recently raised his 2024 and 2025 earnings estimates for Berkshire, citing higher investment income and better underwriting results at Geico and other insurance subsidiaries. Meredith also increased his 12-month price target for Berkshire's Class A shares to $759,000, indicating confidence in the company's future performance.

Berkshire Hathaway's original Class A shares remain one of the most expensive on Wall Street, a strategy Buffett has maintained to attract long-term, quality-oriented investors. In 1996, the company introduced Class B shares, priced at a fraction of Class A shares, to make Berkshire more accessible to smaller investors. As Berkshire Hathaway cements its place in history, the company's achievement is not just a milestone for Buffett but also a testament to the enduring appeal of its business model in a rapidly changing market.