Warren Buffet was born in 1930 and bought his first stocks at the age of 11. In 1965, he ran his own investment firm called Berkshire-Hathaway (NYSE: BRK.A)(NYSE: BRK.B)where he further cements his reputation as one of the world’s greatest investors.

Berkshire has developed into a conglomerate that brings together several wholly owned subsidiaries under its umbrella and has a portfolio of 47 publicly traded stocks and securities.

Berkshire’s largest holding is Applewhich became the world’s first trillion-dollar company in 2018. Since then Microsoft, NVIDIA, Amazon, alphabetAnd Meta-platforms have also reached this milestone.

Berkshire could soon become the first non-tech company in the U.S. to join them. Its shares have delivered an incredible 19.8% annual return since 1965, giving the company a $922 billion valuation. Here’s why it could cross the $1 trillion mark next year.

Buffett uses a simple investment strategy

Buffett is a value investor, meaning he likes to buy great companies at an attractive price with the intention of holding them for the long term. Robust profitability, reliable growth, strong management teams and shareholder-friendly programs such as share buybacks and dividend programs are just some of the characteristics he looks for when making his investment decisions.

Time is Buffett’s greatest ally, as he relies on the magic of compound interest to build his wealth for him. There is no better example than Berkshire’s investment in Coca-ColaBerkshire spent $1.3 billion between 1988 and 1994 to buy shares in the beverage giant and still owns all of them today. This position is now worth a whopping $27.5 billion.

Aside from the huge capital gain, Berkshire received $736 million in dividend payments from Coca-Cola in 2023, and this year the amount is expected to be even higher!

Berkshire’s other long-term investments in American Express, Moody’s Corpand Apple (to name a few) are similar success stories.

Berkshire invests in high-quality companies

Berkshire Hathaway was originally a textile company and was on the verge of bankruptcy before Buffett came in and bought it in 1965. But he quickly realized he could not save the old company and converted it into a holding company for his various investments.

Over the years, Berkshire has acquired entire companies such as Duracell, GEICO Insurance, and Dairy Queen. In addition, the conglomerate’s portfolio of publicly traded stocks and securities is worth $302.4 billion. As I mentioned above, Apple is the largest holding in that portfolio.

The story continues

Berkshire has spent about $38 billion acquiring Apple shares since 2016, and although it has sold more than half of its position this year, its remaining stake Despite it worth over $86 billion.

Bank of America and American Express are Berkshire’s second and third largest holdings. The company also holds significant stakes in energy companies Chevron And Occidental Petroleumworth 17.8 and 14.9 billion US dollars respectively.

Berkshire’s smaller positions include visa (2.1 billion US dollars), MasterCard ($1.8 billion) and even Amazon ($1.6 billion). Berkshire first bought Amazon shares in 2019, and Buffett regretted not recognizing the opportunity sooner. Even the best investors in the world make mistakes!

Berkshire’s financial growth supports the above-average price gains of its stock

Berkshire stock rose 4,384,748% between 1965 and 2023, representing an annual return of 19.8%, outperforming the 31,223% gain (10.2% annually) in S&P500 in the same period.

In dollar terms, an investment of just $1,000 in Berkshire stock in 1965 would have been worth a whopping $43.8 million by the end of 2023. The same investment in the S&P 500 would have grown to just $313,230. Berkshire continues to outperform the S&P 500, gaining 19.1% this year versus just 12.7% for the index.

Berkshire generated revenue of $183.5 billion in the first half of 2024 (ended June 30), up 3.1% from the same period last year. Over $76.3 billion came from sales and services provided by the conglomerate’s various business interests, and another $43.4 billion came from insurance premiums. Its energy and utilities businesses also contributed $35.7 billion.

Berkshire also reported a net profit of $43.3 billion for the first half of the year, so the company is also very profitable.

Although Berkshire’s revenue growth in 2024 has been fairly modest so far, investors should focus on long-term results. The conglomerate generated revenue of $49.3 million in 1965, and according to Wall Street’s consensus estimate, that figure is expected to exceed $368.6 million. billion in 2024!

Berkshire could join the $1 trillion club within a year

Berkshire has a market cap of $922 billion at the time of this writing, so its stock only needs to rise another 8.5% to put the conglomerate in the $1 trillion club. Given its 58-year track record of 19.8% annual growth—and its 19.1% gain so far in 2024—that seems likely to happen within the next year. Mathematically, it could reach that milestone within the next six months.

Still, Berkshire is now sitting on a record $277 billion in cash, thanks in part to recent sales of Apple stock. Cash typically yields a lower return than growth assets like stocks, which could be a short-term obstacle to reaching the trillion-dollar mark. On the plus side, this leaves Berkshire perfectly positioned to capitalize on new opportunities that could fuel its long-term growth.

In addition, Berkshire is on track to deliver record dividends from its top holdings this year, as Apple, Bank of America, American Express and Coca-Cola have each increased their payouts so far. In addition, the Federal Reserve could cut interest rates up to three times by the end of 2024, which will provide a tailwind for Berkshire’s consumer, transportation and logistics businesses, which are sensitive to fluctuations in economic growth.

Finally, Buffett authorized the repurchase of $2.9 billion of Berkshire stock in the first half of 2024 to return money to shareholders, a clear sign that he still believes the conglomerate represents good value. As my colleague Sean Williams points out, Berkshire’s total repurchases over the past six years amount to nearly $78 billion, more than Buffett has invested in any other stock.

Should you invest $1,000 in Berkshire Hathaway now?

Before you buy Berkshire Hathaway shares, consider the following:

The Motley Fool Stock Advisor The analyst team has just published what they believe to be The 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t among them. The 10 stocks that made the cut could deliver huge returns in the years to come.

Consider when NVIDIA created this list on April 15, 2005… if you had invested $1,000 at the time of our recommendation, You would have $641,864!*

Stock Advisor offers investors an easy-to-understand plan for success, including instructions on how to build a portfolio, regular updates from analysts, and two new stock recommendations per month. The Stock Advisor Service has more than quadrupled the return of the S&P 500 since 2002*.

View the 10 stocks »

*Stock Advisor returns as of August 12, 2024

Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Bank of America is a promotional partner of The Ascent, a Motley Fool company. American Express is a promotional partner of The Ascent, a Motley Fool company. Anthony Di Pizio does not own any stocks mentioned. The Motley Fool owns and recommends Alphabet, Amazon, Apple, Bank of America, Berkshire Hathaway, Chevron, Mastercard, Meta Platforms, Microsoft, Moody’s, Nvidia, and Visa. The Motley Fool recommends Occidental Petroleum and recommends the following options: long January 2025 $370 calls on Mastercard, long January 2026 $395 calls on Microsoft, short January 2025 $380 calls on Mastercard, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

1 Unstoppable Stock That Will Join Nvidia, Apple, Microsoft, Amazon, Alphabet, and Meta in the $1 Trillion Club was originally published by The Motley Fool