Berkshire shares jump after big profit gain as Buffett’s conglomerate nears $1 trillion valuation

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Warren Buffett tours the grounds of Berkshire Hathaway's annual meeting in Omaha, Nebraska.

David A. Grogan | CNBC

Berkshire Hathaway Stocks rose on Monday after Warren Buffett's conglomerate reported strong fourth-quarter earnings over the weekend.

Berkshire Class B shares rose 2.3% in premarket trading, likely adding to its 17% gain already this year. Berkshire closed Friday with a market value of $905.5 billion, according to FactSet.

Berkshire on Saturday reported fourth-quarter operating profit of $8.481 billion, up about 28% from the $6.625 billion in the year-ago period, driven by big gains in its insurance business. Operating profits refer to profits of companies in the insurance, railroad, and utility sectors.

Meanwhile, Berkshire's cash holdings also rose to record levels. The conglomerate had $167.6 billion in cash in the fourth quarter, surpassing the record $157.2 billion held by the conglomerate in the previous quarter.

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Berkshire Hathaway Class A

Still, one analyst said he believes the stock is fairly valued and said any upside from the conglomerate's rosy earnings outlook is already priced into the stock.

“BRK shares have significantly outperformed their financial services peers in 2023, supported by a relatively strong earnings outlook. “We expect continued solid earnings from BRK’s diverse group of operating companies,” James Shanahan of Edward Jones wrote on Saturday. “However, in our view, the current share price reflects these positive aspects.”

Investors also shouldn't expect Buffett's often candid comments to help the company get to $1 trillion faster. In fact, the billionaire investor said in his annual letter, also released last weekend, that he expects Berkshire to only marginally outperform the average company from now on, especially since the conglomerate has a net worth of 6% of all S&P 500 companies reached.

“With our current business mix, Berkshire should perform slightly better than the average American corporation and, more importantly, also operate with significantly lower risk of permanent loss of capital,” Buffett said. “Anything other than 'slightly better' is wishful thinking.”

Buffett added that only a handful of companies are likely to “make a real difference” to the company through acquisitions. The last major deal Berkshire closed was in 2022, when it bought insurer and conglomerate Alleghany for $11.6 billion.

—CNBC's Michael Bloom contributed to this report.