Berkshire Hathaway joins the trillion dollar club

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Berkshire Hathaway made history by becoming the first non-tech US company to achieve a market valuation of $1 trillion. This milestone came 44 years after the company's Class A shares began trading in 1980. It places Berkshire Hathaway in an exclusive group of just eight other US companies to have reached this valuation, including tech giants like Apple, Microsoft and Amazon.

Unlike its tech-heavy peers, Berkshire Hathaway's rise is rooted in its diverse portfolio of traditional industries such as insurance, railroads and retail. What is particularly remarkable is that these are not high-growth sectors. Since the financial crisis in 2008, rock-bottom interest rates have inflated asset prices and favoured high-growth stocks, particularly in the technology sector.

These are not areas in which Warren Buffett typically invests. His investment style is value-oriented, focusing on long-term investments in high-quality, understandable companies with strong fundamentals, minimal debt and sustainable competitive advantages, all while emphasising patience, discipline and simplicity.

In fact, his investment style has been out of favour since the 2008 financial crisis, as low interest rates inflated equity markets beyond what would traditionally be considered value. This environment favoured high-growth tech stocks, whose distant future earnings were easier to price in. The subsequent AI craze further pushed equity valuations higher.

Yet, despite the challenging investment environment for Buffett’s approach, Berkshire Hathaway still grew to reach that impressive $1 trillion milestone.

Source: Visual Capitalist

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