Warren Buffett's Berkshire Hathaway closes in on record high as its Apple stake and brighter outlook cheer investors
Class B shares of Warren Buffett's conglomerate have jumped 15% this year. They ended the day at $354, not far off their record high of $360 in March last year. Buffett has now overseen a remarkable 4,300,000% gain in the value of Berkshire's original Class A shares since he took over as CEO in 1965.
Berkshire's Apple shares remain a key driver of the stock. The famed investor's company owns 5.8% of the iPhone maker, a stake worth $175 billion as of Thursday's close. In other words, a single position in Buffett's portfolio accounts for 22% of Berkshire's entire market value. Apple's stock price has surged 47% this year, partly because investors believe it will be a major beneficiary of artificial intelligence. AI bulls predict the technology will boost productivity and bolster corporate profits. They expect Apple and other Big Tech companies like Microsoft, Alphabet, and Tesla to be key players in the space.
Berkshire shares have also been buoyed by an improved economic backdrop. Inflation spiked last summer to 9.1% — a 40-year high — but dropped to 3% in June. The Federal Reserve rushed to curb the price growth by hiking interest rates from virtually zero last spring to north of 5% today. Now that prices aren't rising much faster than its 2% target, investors are hoping the US central bank will ease off and avoid sparking a recession.
It's worth noting that Berkshire is basically a microcosm of the US economy, with businesses spanning insurance, energy, railroads, manufacturing, industrials, retail, and other sectors. The conglomerate earns about 80% of its operating profits from consumer-sensitive businesses, one analyst has estimated. As a result, it's vulnerable to rising prices, steeper borrowing costs, and recession fears causing a slump in consumer spending.
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