Berkshire Hathaway experienced a rise in its shares on Monday following robust fourth-quarter earnings, as reported over the weekend by Warren Buffett’s conglomerate. The premarket trading for Berkshire Class B shares showed a 2.3% increase, further building on the already impressive 17% gain for the year. As of Friday’s close, Berkshire held a market value of $905.5 billion, according to FactSet.
The conglomerate disclosed operating earnings of $8.481 billion for the fourth quarter, marking a 28% increase compared to the previous year’s $6.625 billion. This growth was primarily attributed to significant gains in its insurance sector. Berkshire’s cash reserves also reached a record high, reaching $167.6 billion in the fourth quarter, surpassing the prior quarter’s record of $157.2 billion.
Despite the positive outlook, an analyst cautioned that the stock might already be fairly valued, suggesting that the optimistic earnings expectations are already factored into the stock price. Edward Jones’ James Shanahan noted that Berkshire’s shares have outperformed financial services peers in 2023, driven by a robust earnings outlook, but he believes the current share price adequately reflects these positives.
Warren Buffett, in his annual letter released over the weekend, conveyed a tempered perspective on future performance. He anticipates only a slight outperformance compared to the average company, especially as Berkshire approaches a net worth equivalent to 6% of the total S&P 500 companies. Buffett mentioned that the conglomerate’s mix of businesses positions it to do slightly better than the average American corporation, operating with lower risk of permanent capital loss. However, he cautioned against expecting anything beyond a modest improvement, stating that such expectations would be wishful thinking.
Buffett also noted that only a handful of businesses are likely to significantly impact Berkshire through acquisitions, highlighting that the conglomerate’s last major deal was in 2022 when it acquired insurer and conglomerate Alleghany for $11.6 billion.