Warren Buffett’s Berkshire Hathaway Enters $1 Trillion Club

Shares of Berkshire Hathaway (BRK.A; BRK.B) rose in intraday trading on Wednesday, pushing the industrial conglomerate’s market capitalization above $1 trillion for the first time. 

Wall Street legend Warren Buffett’s holding company is just the 8th U.S. company and the 9th in the world to achieve the feat. And it is only the second company outside the technology or consumer discretionary sectors to hit $1 trillion, the first being the Saudi Arabian state-controlled oil company Saudi Aramco.

Berkshire’s Long Path to $1 Trillion

Berkshire and its leader are famous for their slow-and-steady approach to business and investments, and Berkshire’s path to the $1 trillion club reflects that. Of all the U.S. companies to reach $1 trillion, Berkshire’s path to 13 digits has been the longest. 

The company has its roots in the nineteenth-century textile industry, but the name Berkshire Hathaway was minted by the merger of Berkshire Fine Spinning Associates and Hathaway Manufacturing Company in 1955. 

Warren Buffett, as the leader 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 short order, overhauled the business. 

Buffett acquired Berkshire’s first insurance business, National Indemnity Company, in 1967, putting it on a path to become a financial powerhouse. Buffett diversified the company’s portfolio in the coming decades through acquisitions that included BNSF Railway, battery maker Duracell, and ice cream chain Dairy Queen.

All along, Buffett and his business partner Charlie Munger continued to add to Berkshire’s equity portfolio, focusing on building stakes in companies they thought the market had undervalued. As of the end of the second quarter, Berkshire’s equity 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.

Will Berkshire Close Above $1 Trillion

Berkshire ended Tuesday with a market cap of about $995 billion. To close above $1 trillion, the stock will need to gain about 0.5% on Wednesday.

However, due to the company’s dual-class structure, it’s impossible to say exactly at what price Berkshire stock will need to close on Wednesday to cement its spot in the $1 trillion club.

The peculiarities of Berkshire’s share structure even make it difficult to estimate what percentage gain the stock will need to stay above $1 trillion. Different classes of one company’s stock often rise and fall in unison, if the shares are similarly liquid, because the underlying business is the same.

But Berkshire’s Class B shares, of which there are more than 1.3 billion outstanding, are incredibly liquid compared to its Class A shares, which total just 553,234. Class A shares, because of their scarcity and high price (about $694,000 as of Wednesday afternoon) rarely change hands, which affects price discovery and can mute share price movements. For example, as of 1:45 p.m. ET on Wednesday, Class A shares were up 0.33% while Class B shares were up 0.41%.