Tag: Berkshire Hathaway

Berkshire’s Rare Tech Move Sends Alphabet Stock to All-Time High

Posted on by slightbourne@noblecapitalmarkets.com

Alphabet shares surged to a record high on Monday, climbing nearly 6% after Berkshire Hathaway disclosed a new multibillion-dollar stake in the Google parent company. The purchase, totaling 17.85 million shares valued at approximately $4.9 billion, marks one of Berkshire’s final large investments under Warren Buffett’s leadership — and a notable shift for a conglomerate traditionally cautious about high-growth tech stocks.

Berkshire’s move represents a major endorsement of Alphabet’s expanding artificial intelligence strategy during a period of heightened scrutiny across the tech sector. While many investors have begun questioning whether the rapid rise of AI-driven valuations is sustainable, Berkshire’s investment signals confidence in Alphabet’s fundamentals and its long-term ability to capitalize on AI innovation.

The investment also stands out given Berkshire’s historic stance on technology. Although Apple remains Berkshire’s largest holding, Buffett has long viewed it as more of a consumer products company than a pure tech play. A direct investment in Alphabet, however, reflects a meaningful step toward embracing companies at the center of the AI revolution. Market strategists point out that the move aligns with value-investing principles, given Alphabet’s comparatively attractive valuation relative to other AI frontrunners.

Investor sentiment around tech has become more cautious in recent months. Business leaders and market analysts have warned that the AI boom — powered by heavy data-center spending and ambitious product pipelines — could be creating inflated expectations. The Roundhill Magnificent 7 ETF, which tracks top tech names such as Microsoft, Nvidia, and Alphabet, has been mostly flat since September after significantly outperforming the broader market earlier in the year.

Despite the broader slowdown, Alphabet has stood out as one of the strongest performers among the “Magnificent Seven” stocks. Shares have surged nearly 14% in the current quarter and are up 46% year-to-date, making it the group’s top performer. Analysts attribute this strength to Alphabet’s accelerating AI investments, robust cloud division growth, and its ability to leverage its massive advertising business to fund further innovation.

Alphabet also trades at a relative discount compared to its peers, with shares valued at roughly 25 times forward earnings estimates. Microsoft trades at 29 times, while Nvidia approaches 30 — making Alphabet an appealing option for an investor focused on balancing growth potential with valuation discipline.

CFRA analysts highlight that Berkshire’s investment validates Alphabet’s strategic direction, particularly around Google Cloud and the expanding Gemini AI ecosystem. Recent earnings revealed that AI-powered tools and infrastructure investments are helping transform Google Cloud into a major growth engine, reversing its earlier status as a distant third player in the cloud market.

The move also reflects a bit of unfinished business for Buffett, who has previously acknowledged regretting missing the chance to invest in Google early on. With Berkshire preparing for leadership transition as Greg Abel is set to assume the CEO role at the end of 2025, the investment may represent a final major pivot toward companies leading the next technological era.

Alphabet’s rally could add roughly $180 billion in market value if gains hold. And with Berkshire’s reputation for long-term conviction, the investment has quickly captured the attention of both institutional and retail investors — offering a strong signal of confidence amid an increasingly cautious tech landscape.

Warren Buffett’s Berkshire Hathaway in the Spotlight After Strong Earnings and New Legal Risks

Posted on by slightbourne@noblecapitalmarkets.com

Berkshire Hathaway, the conglomerate led by legendary investor Warren Buffett, was in the news this week after posting strong fourth quarter financial results. However, the company’s stock price slipped after Buffett warned of more modest growth prospects ahead and new legal risks facing one of Berkshire’s businesses were highlighted.

In his widely-read annual letter to shareholders released over the weekend, the 93-year-old Buffett reported that Berkshire’s operating profit soared 21% to $37.4 billion in 2022. These stellar results were driven by gains in the company’s massive insurance operations, which include brands like GEICO and General Re. Berkshire also boasted enormous cash reserves topping $167 billion by the end of last year.

This kind of performance has led some investors to speculate that Berkshire may soon reach a $1 trillion valuation, joining an elite club of companies like Apple and Microsoft. But Buffett himself threw cold water on expectations that Berkshire would continue to post outsized growth, stating “All in all, we have no possibility of eye-popping performance.”

In plain English, Buffett was telling shareholders not to expect Berkshire to significantly outperform the overall stock market going forward. He admitted the conglomerate, which owns over 90 businesses ranging from railroads to candy makers, now lacks enough attractive investment options to “move the needle.”

Still, Buffett assured investors that conservatively-managed Berkshire is “built to last” even in turbulent times. He also confirmed that his trusted deputy, Greg Abel, is ready to smoothly take over managing the company when needed.

But some cracks in Berkshire’s fortress-like foundation were revealed this week when the company disclosed new legal risks facing one of its utilities, PacificCorp. PacificCorp, which operates as Rocky Mountain Power, may be sued by the federal government over alleged failure to prevent a major wildfire in Oregon in 2020.

Buffett’s letter predicted the total costs of wildfires, which are becoming larger and more frequent across the Western U.S., will weigh on Berkshire’s utility earnings for many years. This warning likely contributed to the company’s stock slipping from all-time highs reached after the strong quarterly results were announced.

While Berkshire still posted impressive overall gains last year, the legal overhang on one of its utilities and Buffett’s clear message that Berkshire’s best growth is likely in the past may temper investor enthusiasm going forward. The legendary investor, who has delivered 20% average annual returns to shareholders over 50 years, is clearly preparing investors for more modest goals ahead.

Some analysts believe Berkshire’s stock may be approaching full valuation given the cautious outlook expressed by Buffett. The company’s enormous size also limits its ability to find investments large enough to significantly boost future growth. However, Berkshire still possesses an unparalleled collection of businesses that generate steady profits year after year. For long-term investors, Berkshire remains a rock-solid holding despite its fainter future growth prospects.

Price Moves When Warren Buffett Buys and Sells (Based on May 16 SEC Filing)

Posted on by cpatches

The Big Price Impact on Stocks After Warren Buffett’s Most Active Buying Spree

Warren Buffett and Berkshire Hathaway (BRK.A, BRK.B) were actively spending down the company’s large pool of cash last quarter, just as they promised during their recent annual meeting. This makes sense as some stock prices are lower than they have been in years, and a few sectors are showing they could have plenty of upside potential. It makes even more sense when you consider that Berkshire Hathaway was sitting on $144 billion in cash. The inflation rate is now running above 8% and eroding the value of every unearning penny.

Jumping into the market can be costly if wrong, but investor’s ‘dry powder’ is being eroded with increased costs by the day – finding a place for money to grow by at least the inflation rate would seem prudent. The analysts at Berkshire Hathaway are certainly aware of this.

The positive impact of Berkshire showing confidence in a company is often all that is needed to exceed the near non-earnings holding a cash position. Below we look at three Berkshire Hathaway changed positions as reported on May 16, and then compare the stock’s price moves versus the overall market.

Where Did They Gain Exposure

As revealed by the companies 13F filed on May 16, as of March 31 Berkshire Hathaway added Citigroup (C), Paramount Global (PARA), and sold Verizon (VZ). There were older positions added to as well, such as Chevron (CVX), and Activision Blizzard (ATVI). But for the purpose of showing the power of Buffett’s believing a stock is attractive, or in Verizon’s case, no longer attractive, we’ll take a look at the market moves of these companies as of 1pm the day after the 13F was made public.

Source: Koyfin
The above chart of Citibank, Paramount Global, and Verizon from the beginning trading on Monday compares the stocks to the S&P 500 performance during the same short period.

The S&P, as reflected during the short period in this chart, beginning on the date of Berkshire’s 13F filing, shows the S&P 500 up 1.60%. This is substantial in a year when the index has mostly been delivering red to investors. Verizon was the most noteworthy sale of Buffett as they brought their position near zero. The company’s stock rose only 0.11%, well below the S&P benchmark performance.

As for the positions opened during the first quarter by Berkshire Hathaway, Citicorp shot up 8.28%. Paramount Global reacted even more strongly, rising double digits to 13.95%. 

Lessons

While an SEC-registered portfolio new holdings are kept close to the vest before reported in order to avoid insider trading problems, listening to what someone like Warren Buffett is saying at annual meetings and at other times can allow you to get a sense if they have been active, and in what industries. More important, is whether they are active buying or selling. For an investor that is holding a stock which a well-followed investor has decided to sell, can cause significant underperformance for at least the near term.

Other Pertinent Info from the 13F Filing

During the first quarter of 2022, the value of Berkshire’s US stock portfolio rose by 10% to $364 billion. Buffett had indicated the firm he manages has been struggling to find bargains in recent years. He blamed this on stocks swelling to record highs, fierce competition from private equity firms, and SPACs which increased competition and costs of acquisitions. Even Berkshire’s own rising stock price made it unappealing as a company stock buy-back.

A change of appetite took place in the first quarter of 2022. Berkshire bought $51 billion worth of equities and sold less than $10 billion in stocks. Its net cash reduction of $41 billion helped slash its cash pile by 28% to $106 billion. Q1 2022 marked one of the most active buying periods in Berkshire Hathaway’s history.

Take-Away

Well known, successful investors can either make a winner out of your holding or cause it to trade at a pace below the market. While knowing and trading on information before it is made public can get you in trouble, investors like Buffett do provide guidance. These hints as to their thinking and likely direction may help investors somewhat. This is why it always makes sense to know what they’re saying – it isn’t fun holding something they just reported sold, and the tailwind they create when you’re long the same company can be profitable.

Paul Hoffman

Managing Editor, Channelchek

Sources

https://www.sec.gov/Archives/edgar/data/1067983/000095012322006442/xslForm13F_X01/primary_doc.xml

https://whalewisdom.com/filer/berkshire-hathaway-inc#google_vignette

www.koyfin.com