Warren Buffett just joined the $1 Trillion Market-Cap Club. Here’s what you need to know

You did it, Warren. Berkshire Hathaway (BRK.A 1.85%) just passed a trillion dollar market capitalization, the eighth non-state-owned company in history to reach this milestone. It started from a small textile factory over 50 years ago, and now the small team of investors and business operators led by the legendary investor Warren Buffett has just reached a huge numerical milestone. It now has a larger market cap than technology backers such as adze and Taiwan Semiconductor Manufacturing.

Not bad for an insurance and investment conglomerate in America’s heartland. Despite Buffett’s run of the mill years (he’s now 93), the conglomerate is in as good a place as ever. Here’s what the stock milestone means and why Berkshire Hathaway is one of the world’s most resilient businesses.

Market value between $17 million and $1 trillion

In the late 1960s, Warren Buffett took control of Berkshire Hathaway by buying 49% of its shares. At the time, it was a struggling textile mill, and he only had to pay $8.3 million for the stake. Thus, the total market value of Berkshire Hathaway amounts to approximately 17 million dollars.

Fast forward to today, and Berkshire Hathaway has just passed $1 trillion in market capitalization. That’s a 58,823-fold increase in market value since Buffett took over the company. Per share, Buffett’s average purchase of Berkshire stock was $14.86 in the 1960s. Today, the stock trades for $696,502. This is not a typo; a single share of Berkshire Hathaway is worth more than most people’s annual salaries (yet you can buy a stake through affordable B shares).

That’s a 46,871-fold increase from Buffett’s original purchase. While this is slightly less than the growth in market cap, it shows the effectiveness of Buffett’s wealth building strategy. It didn’t dilute shareholders at all to get to a trillion dollar market cap. Someone who invested $1,000 with Buffett at the start would now have a stake worth $47 million. This is why Buffett is arguably the best investor ever.

A resilient business model and a strong balance sheet

Why was Berkshire Hathaway so successful? There are two key reasons outside of Buffett’s general ability when it comes to making money.

First, Berkshire focused on insurance operations. Insurance brings float, which is cash you have on your balance sheet that you later pay out in claims. Buffett used this float to make great investments in stocks like Coca cola and American Express. Second, Berkshire acquired businesses with sustainable cash flows, from railroads, electric utilities, retail companies, and even See’s Candies. The one thing these businesses have in common is that they throw a ton of cash at the parent company that Buffett can use to invest. He set out to generate as much cash as possible to use to buy undervalued stocks.

Now the company is one of the largest in the world and has a strong balance sheet. After selling a lot of them Apple investment in 2024, the company has a monster cash pile. All of Berkshire Hathaway’s cash, treasury and investments totaled more than $600 billion at the end of the second quarter. Again, not a typo. There are only 13 other companies in the world with market capitalizations larger than Berkshire Hathaway’s investments and cash pile. This is what I call a solid balance sheet and why Berkshire Hathaway is one of the most resilient companies in the world.

BRK.A Price-to-book value data by YCharts.

Is Berkshire Hathaway stock a buy today?

Even though it’s considered a boring, stodgy conglomerate these days, Berkshire Hathaway has had quite the run over the past few years. Over the past five years, Berkshire’s stock has returned a total of 132%, which beats the S&P 500’s return of 112%. Over the last 10 years, it trades at a record price-to-book (P/B) of 1.67. The average over the last 10 years was 1.40.

P/B tells investors what price you are paying for the assets on Berkshire’s balance sheet. This is a valuable tool for an investment, insurance and financial focused company like Berkshire Hathaway. If the P/B is above 1, it means you are paying a premium to the declared value. Buffett and the Berkshire Hathaway team certainly deserve a premium given their track record. How much is the real question investors should be asking.

I think it will be hard for investors to lose money holding Berkshire Hathaway stock over the long term, even at this inflated multiple. But with a trillion dollar market cap, don’t expect a huge stock performance over the next 10 to 20 years.