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Warren Buffett Triumphs Once More: Berkshire Hathaway's Class A Shares Breach $600,000 Mark, What's Next?

Moomoo News Global wrote a column · Feb 20 04:57
Last week, Warren Buffett's Berkshire Hathaway set a new stock price record, with its Class A shares surpassing the milestone of $600,000 per share, bringing the company closer to achieving a market value of $1 trillion. Since 1997, $Berkshire Hathaway-A(BRK.A.US)$ has returned 1726.6%, far outperforming 579.17% of the $S&P 500 Index(.SPX.US)$ over the same period.
Buffett's decision not to split the expensive A-class shares is because he seeks to attract high-quality value investors who are focused on the long-term growth and sustainability of the companies. In the past two years, the legendary investor has also made several major moves, including the $11.6 billion acquisition of Alleghany Insurance, a significant investment in energy stocks, and investments in the five major Japanese trading companies.
Warren Buffett Triumphs Once More: Berkshire Hathaway's Class A Shares Breach $600,000 Mark, What's Next?
Berkshire Hathaway Reduces Apple Holdings Slightly in Q4 2023, Increases Stakes in Chevron and Western Oil
According to Berkshire Hathaway's latest 13F filing released last week, the company's equity holdings increased by approximately 12% in Q4 2023. While the company reduced its holdings in Apple, a long-time top holding, it increased its investments in energy stocks during the quarter.
1. Specifically, Berkshire Hathaway sold 10 million shares of $Apple(AAPL.US)$, reducing its Apple position by approximately $1.822 billion based on the average stock price. Despite the reduction, Apple remains Berkshire Hathaway's largest holding, accounting for 50.19% of its portfolio. Some analysts interpreted the move as a decision made due to Apple's high valuation, adverse fundamental conditions, and overexposure.
In addition, Berkshire Hathaway also reduced its stakes in $Paramount Global-B(PARA.US)$ by 32%, and in $HP Inc(HPQ.US)$by approximately 77%, and completely sold out of stocks in home builder $D.R. Horton(DHI.US)$, insurance companies $Globe Life(GL.US)$ and $Markel Group(MKL.US)$, and Brazilian credit card processor $StoneCo(STNE.US)$.
2. Among the top ten holdings, only two stocks were increased: $Chevron(CVX.US)$ and $Occidental Petroleum(OXY.US)$, both energy stocks. Chevron's shares were increased by 15.8 million to 126 million, with an investment value exceeding $19 billion. Western Oil also increased its stake by 10.7% to 248 million shares. Buffett's optimism toward oil stocks may be attributed to factors such as the global decline in capital expenditures in the energy sector over the past decade, which has constrained oil supply, and the rising geopolitical risks.
It is worth noting that the company has kept its secret holdings for a second consecutive quarter with SEC approval, which may involve financial stocks such as banks, financial companies, or insurance companies. As of the end of September 2023, Berkshire Hathaway's cash balance reached a historical high of $157.2 billion, leaving investors eager to know how Buffett will allocate these funds.
Berkshire Hathaway with Attractive Valuation, Poised to Become First Non-Tech Stock with $1 Trillion Market Cap in the US
Based on data from YCharts, Berkshire Hathaway-A currently has a P/E (TTM) of around 11.6 times, which is lower than the median value of 13.40 in the past 5 years and the 5-year average of 24.07. Compared to the tech giants facing overvaluation concerns, Berkshire Hathaway appears to have a stronger safety margin among the top ten stocks regarding market capitalization. As of last Friday's close, the stock's market value was approximately $880 billion, only about $120 billion away from the milestone of $1 trillion. With the stock price continuing to rise, it is poised to become the only non-tech company in the trillion-dollar market value club of the US stock market.
Source: moomoo
Source: moomoo
In addition, according to Strategas Securities, considering the market value weight and earnings contribution to the S&P 500 index, Berkshire Hathaway is the most promising candidate to replace Tesla and enter the Mag 7. The other two potential newcomers are Broadcom and Eli Lilly.
Source: Strategas Securities
Source: Strategas Securities
Insurance Business Poised to Offset Other Headwinds in Upcoming Financial Report
Berkshire Hathaway is expected to release its annual report and letter to shareholders on February 24, 2024, which will provide more detailed financial data and investment and business details. According to Bloomberg Intelligence, the company's insurance profits are expected to increase significantly in Q4 2023, mainly due to rising interest rates, a decrease in catastrophic losses, and improved underwriting performance from Geico. Boosted by this, the company's operating profit in Q4 is expected to grow by over 20% compared to last year, reaching a range of $9 billion to $10 billion.
"Though repurchases can bounce around, we don't think they'll get much higher than the recent $1-$2 billion band," wrote Bloomberg analyst Matthew Palazola.
Source: Strategas Securities, moomoo, Bloomberg, WhaleWisdom, Reuters
By Moomoo News Irene
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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