Although the firm continues to hold its position among the world’s 10 largest companies by market cap, it has entered the select club of companies valued at more than US$1 trillion.
Wall Street legend Buffett’s company is only the eighth American company and the ninth in the world to reach this milestone. It is also the second company outside of the technology or consumer discretionary sectors to reach $1 trillion, the first being Saudi state oil company Saudi Aramco.
Berkshire’s long road to a trillion
Berkshire and its leader are known for their slow-and-steady approach to business and investing, and Berkshire’s path to the trillion-dollar club reflects that. Of all the American companies that have reached the trillion-dollar mark, Berkshire’s journey to 13 figures has been the longest.
The company has its roots in the 19th century textile industry, but the name Berkshire Hathaway emerged from the merger of Berkshire Fine Spinning Associates and Hathaway Manufacturing Company in 1955.
Warren Buffett, as head of the investment firm Buffett Partnership Limited, began building a stake in the struggling textile company in 1962 and by 1965 had become its largest shareholder. He took control of the company that year and, in a short time, turned the business around.
Buffett acquired Berkshire’s first insurance business, National Indemnity Company, in 1967, setting it on a path to becoming a financial powerhouse. Buffett diversified the company’s portfolio in the following decades through acquisitions that included BNSF Railway, battery maker Duracell and ice cream chain Dairy Queen.
Over time, Buffett and his business partner Charlie Munger continued to add to Berkshire’s stock portfolio, focusing on building stakes in companies they believed the market had undervalued. At the end of the second quarter, Berkshire’s stock portfolio totaled $284.9 billion, which included an $84 billion position in Apple (AAPL) and $41 billion in Bank of America (BAC) stock. Unrealized gains account for nearly $200 billion of Berkshire’s stock portfolio.
Buffett sells another $1 billion in Bank of America shares
Warren Buffett’s company has sold more of its stake in Bank of America, unloading nearly 25 million shares for almost $1 billion in the past week.
Berkshire Hathaway has steadily sold 116 million shares of Bank of America since July. But it still controls nearly 12% of the Charlotte, North Carolina-based bank’s stock.
After the sale was disclosed, Berkshire’s Class A shares—already the most expensive stock on Wall Street—gained $7,184.62 on Wednesday, selling for $698,534.62. This elevated the Omaha, Nebraska-based conglomerate into the club of companies valued by the stock market at more than $1 trillion. But that’s still far from market giants Nvidia and Microsoft, which are now valued at more than $3 trillion.
The Bank of America stake remains one of Berkshire’s largest investments, behind only its large stake in Apple and its long-standing investment in American Express.
Buffett surprised many earlier this month when he revealed he had halved his investment in Apple and, in the process, amassed a record $277 billion in cash as of the end of June 30. Berkshire’s cash has only grown since then, with sales of Bank of America stock and all the profits from the array of companies it owns, including the BNSF railroad, the Geico insurer, a collection of utilities and a host of retail and manufacturing businesses.
Buffett watchers say the recent sales of Berkshire shares are likely a sign that the revered investor believes the stock market is overvalued and suggest he may be trying to prepare to take advantage of a downturn.
Buffett never discusses why he’s buying and selling certain stocks as he does, and he hasn’t offered any explanation for Bank of America’s sales. He prefers to keep his moves secret so other investors can’t copy him, but the Securities and Exchange Commission requires him to file updates on Berkshire’s holdings in Bank of America because he owns more than 10% of the bank.
Buffett began selling shares of Berkshire’s Bank of America after they hit a new 52-week high of $44.44 in July. The latest sales were made at average prices just below $40 a share. The stock rose slightly on Wednesday to $39.80.
Source: Ambito
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