article

On Wednesday, Warren Buffett's Berkshire Hathaway saw its share price rise by over 1%, with its market value surpassing the $1 trillion mark for the first time, making it the first American company outside the tech industry to join the "trillion-dollar club."

Currently, the world's largest companies by market value are dominated by tech firms, including Apple, Nvidia, Microsoft, Google's parent company Alphabet, Amazon, and Meta. The only non-tech company with a market value exceeding $1 trillion is the Saudi Arabian national oil company, Saudi Aramco.

This year, Berkshire's strong insurance performance, coupled with expectations that the Federal Reserve will cut interest rates at its September meeting, has continuously boosted market optimism, which in turn has supported Berkshire's share price. The company's stock has risen by about 30% year-to-date, significantly outperforming the broader U.S. stock market, with the S&P 500 Index rising by about 18% over the same period. This year also marks one of Berkshire's best annual starts in a decade.

Advertisement

In just one year, Berkshire's market value has increased by over $200 billion, setting a new record for the company, although this growth still contrasts sharply with Nvidia's staggering market value increase of nearly $2 trillion. However, when compared to the overall performance of the seven tech darlings in the U.S. stock market, Berkshire's year-to-date gains are not far behind.

It should be noted that from a technical analysis perspective, indicators such as the Relative Strength Index (RSI) have shown that Berkshire has entered a technically overbought territory.

Buffett has spent most of his life transforming Berkshire Hathaway from a struggling textile manufacturer into a vast business empire. He shaped the company alongside his long-time business partner, Charlie Munger, who passed away in November last year at the age of 99.

From 1965 to last year, Berkshire's market value has grown by about 20% annually, which is nearly double the annual return rate of the S&P 500 Index during the same period. This has made Buffett one of the wealthiest people in the world. Berkshire's annual shareholders' meeting has also become a "pilgrimage" for the investment community.

Bloomberg quoted Steve Check, founder and chief investment officer of Check Capital Management, which manages about $2 billion in assets with Berkshire as its top holding, saying:

Berkshire moves more slowly, but with more certainty. It's harder to make money the old-fashioned way.

Berkshire's large stake in Apple has become a concern, and it's wise to reduce this risk. This eliminates a lot of risks.Some industry insiders have also mentioned the headwinds that Berkshire Hathaway may face in the future, including the fact that the fundamental prospects of its core business may not necessarily become brighter; and Berkshire Hathaway has significantly reduced its holdings in Apple, Bank of America, and others, while accumulating a large amount of cash. However, with the Federal Reserve's interest rate cuts, the lower interest rates may affect the returns on its accumulated record cash reserves.

The latest news indicates that in the documents submitted by Berkshire Hathaway to the U.S. regulatory authorities on Tuesday evening local time, the company sold Bank of America's shares again on August 23, 26, and 27, with a total sale of $982 million.

Berkshire Hathaway began to intensively sell off its shares in Bank of America, which was the second-largest holding in its portfolio at the time, in July of this year. The selling was temporarily halted during the sharp drop in the U.S. stock market in August, and then resumed the sale of Bank of America's shares as the U.S. stock market recovered.

Since mid-July, Berkshire Hathaway has reduced its stake in Bank of America by nearly 13% through a series of sales transactions, cashing out a total of $5.4 billion. Calculated at Tuesday's closing price, Berkshire Hathaway still holds 903.8 million shares of Bank of America, valued at $35.9 billion.

The Wall Street Journal website previously analyzed that, from the recent situation, Berkshire Hathaway did not carry out selling operations when the stock price of Bank of America was below about $39. Buffett's latest operations also conform to this pattern.

Buffett has remained silent on the reasons for his reduction in holdings of Bank of America, Apple, and others, and the market generally believes that his continued reduction is to prepare for the "hard times" ahead and to keep enough ammunition.