Berkshire shares jump after big profit gain as Buffett’s conglomerate nears $1 trillion valuation

Warren Buffett tours the grounds at the Berkshire Hathaway Annual Shareholders Meeting in Omaha Nebraska.

David A. Grogan | CNBC

Berkshire Hathaway shares rose on Monday after Warren Buffett’s conglomerate posted strong earnings for the fourth quarter over the weekend.

Berkshire class B shares jumped 2.3% in premarket trading, set to add to their 17% gain already this year. Berkshire closed on Friday with a $905.5 billion market value, according to FactSet.

Berkshire on Saturday posted fourth-quarter operating earnings of $8.481 billion, about 28% higher than the $6.625 billion from the year-ago period, driven by big gains in its insurance business. Operating earnings refers to profits from businesses across insurance, railroads and utilities.

Meanwhile, Berkshire’s cash levels also swelled to record levels. The conglomerate held $167.6 billion in cash in the fourth quarter, surpassing the $157.2 billion record the conglomerate held in the prior quarter.

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Berkshire Hathaway Class A

Still, one analyst said he expects the stock is fairly valued, saying any upside from the conglomerate’s rosy earnings outlook is already priced into the stock.

“BRK shares have significantly outperformed financial services peers during 2023, supported by a relatively strong earnings outlook. We continue to expect solid earnings from BRK’s diverse group of operating companies,” Edward Jones’ James Shanahan wrote on Saturday. “In our view, however, the current share price reflects these positives.”

Investors shouldn’t expect Buffett’s often frank comments to help it get to $1 trillion any faster either. In fact, the billionaire investor said in his annual letter also released this past weekend that he expects Berkshire will only slightly outperform the average company from here on, especially as the conglomerate reaches a net worth of 6% of the total S&P 500 companies.

‘With our present mix of businesses, Berkshire should do a bit better than the average American corporation and, more important, should also operate with materially less risk of permanent loss of capital,” Buffett said. “Anything beyond ‘slightly better,’ though, is wishful thinking.”

Buffett added only a handful of businesses are likely to “truly move the needle” for the firm through acquisitions. The last major deal Berkshire made was in 2022, when it bought insurer and conglomerate Alleghany for $11.6 billion.

— CNBC’s Michael Bloom contributed to this report.

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