Warren Buffett’s Berkshire Hathaway could soon be worth more than Tesla

Berkshire Hathaway’s market capitalisation is fast approaching Tesla’s. Should Warren Buffett’s firm take over the electric carmaker, the conglomerate will become the fifth largest company by market cap on the S&P 500. This has been brought about by a shift away from growth stocks this year. However, Berkshire is not immune from market turmoil, having made a $53bn investment loss in the second quarter.

Warren Buffett’s Berkshire Hathaway’s [BRK.A] market capitalisation is fast approaching Tesla’s, reports MarketWatch. The conglomerate’s market capitalisation stood at $623.852bn for its class A stock at the close of trading Friday, while electric carmaker Tesla’s market cap stands at $671.941bn.

Berkshire now ranks sixth in the S&P 500 by market capitalisation. Ahead of it is Apple [AAPL] ($2.367trn capitalisation), Microsoft [MSFT] ($1.806trn capitalisation), Alphabet [GOOG] ($1.321trn capitalisation), Amazon [AMZN] ($1.216trn capitalisation), and Tesla, according to data from Yahoo Finance.

Berkshire Hathaway staff have themselves contributed to this valuation. At the end of September, vice chairman Greg Abel, who is widely tipped to succeed CEO Warren Buffett, purchased $68m of Berkshire Hathaway shares, according to a filing.

Warren Buffett’s Berkshire Hathaway approaches Tesla’s market cap

This year’s shift away from growth stocks, many of which traded at premium valuations, has helped catapult Berkshire Hathaway into the upper echelons of the S&P 500. Tesla’s share price, for example, has fallen 39.12% this year. In 2021, the electric car maker had a forward price-to-earnings ratio of 121.95. This year that has dropped to 36.9, according to Morningstar data.

Berkshire Hathaway’s share price has proven more resilient, falling 5.52% since the start of the year — a smaller decline than both Tesla and the S&P 500’s 23.09% drop. Over a two year period, Berkshire Hathaway’s stock has gained 33.76% versus the S&P 500’s 5.78% gain.

Still, the company isn’t immune from market fluctuations. While it made an operating profit of $9.238bn in the second quarter thanks to its railroad and insurance businesses, it also posted a $53bn investment loss.

In a statement accompanying the release of second quarter results, Berkshire Hathaway said that focusing on quarterly investment performance “is usually meaningless” and can be “extremely misleading to investors who have little or no knowledge of accounting rules”. Instead, investors should focus on operating earnings excluding changes in the value of its stock portfolio.

The investment loss came at a time of volatility in the markets. Between 1 April 2022 and 30 June 2022 the S&P 500 fell 15.9%. Things were calmer in the third quarter with the S&P 500 falling 3.8% between 1 July and 30 September. Shareholders will be hoping that this is reflected in Berkshire Hathaway’s third quarter earnings, which are due out sometime in November.

What’s in Berkshire Hathaway’s portfolio

Berkshire Hathaway’s holdings cover tech, financial services and consumer goods. As of the end of June 2022, the top five holdings in its portfolio by weighting were Apple (40.9%), Bank of America [BAC] (11%), Chevron [CVX] (8.6%), Coca-Cola [KO] (6.8%) and American Express [AXP] (6.4%), according to CNBC data.

In sixth place was Occidental Petroleum Corp [OXY] — a Houston-based oil company that now accounts for 4.2% of Berkshire’s portfolio. Between 26 and 28 September, Berkshire bought 5.99m shares in the Houston-based oil company, upping its overall stake to 20.9%.

One Warren Buffett-backed company that received positive attention recently was BYD [1211.HK]. Shares in the Chinese electric car market surged after it forecast a jump in profits for the third quarter. BYD said it expects net profits to be between 5.5bn yuan to 5.9bn yuan for the quarter, a rise of 333.6% to 365.11% versus the same period last year. In August, Berkshire Hathaway trimmed its stake in BYD from 20.04% to 19.92%.

Another Buffett-backed company making headlines is Nubank [NUBR33.SA]. The Brazilian-based digital bank announced that it will launch its own cryptocurrency in the country in the first half of next year. Nubank went public last year and has amassed a market valuation of $110.57bn. In June 2021, Berkshire Hathaway took a $500m stake in the company.