Berkshire Hathaway shares have been on a tear on the back of a recent rotation into value and cyclical stocks, setting up the conglomerate to be the next in line for the trillion-dollar market capitalization club. Class B shares of Warren Buffett's conglomerate have jumped 4.7% in the first week of 2022, rising four days in a row. The stock hit a new all-time high on Wednesday, and it blew past its 200-day moving average, a widely watched momentum indicator. The recently rally pushed Berkshire's market cap to around $700 billion, bringing it closer to a trillion-dollar milestone, according to FactSet. If it happens, the conglomerate of the 91-year-old Buffett would be the only non-tech company to join the elite club, standing next to Apple, Microsoft, Alphabet, Amazon, Tesla and Facebook-parent Meta. "It reflects a rotation into value, industrial, cyclical names with an added catalyst of improved insurance pricing," said Cathy Seifert, Berkshire analyst at CFRA Research. To be sure, Berkshire still has a way to go before reaching $1 trillion in market capitalization. The highest price target on Wall Street is from Morgan Stanley, which calls for the stock to rise to $327 a share and a $731 billion value. Investors have been dumping high-flying tech shares and flocking into shares tied to a successful economic recovery in the face of rising interest rates. Berkshire's operating business is a patchwork of companies focused on the traditional backbone of the economy, from railroads, to batteries, insurance, home furnishings and retail, which makes a classic cyclical play. Berkshire saw a double-digit increase in its operating profit last quarter, thanks to a rebound in its railroad, utilities and energy businesses from the pandemic. Berkshire "might be one of the perfect stocks for this moment in the economy," Josh Brown, co-founder and CEO of Ritholtz Wealth Management, said on CNBC's "Halftime Report" on Thursday. Another boost in Berkshire's stock came from the conglomerate's massive stake in Apple. The lucrative bet, which makes up for 40% of Berkshire's equity portfolio, has made more than $120 billion on paper since the conglomerate acquired a 5% stake in the tech giant. Apple shattered yet another record to top a $3 trillion market valuation this week . "I think people see it as a good cyclical play," said Meyer Shields, Berkshire analyst at Keefe, Bruyette & Woods. "You've got the (positive) double-whammy of positive equity market performance boosting both its book value and its price-to-book multiple. Just about all of its insurance businesses are working, and most of its businesses are now raising prices." The Omaha-based conglomerate has also been buying back its own stock aggressively. The company repurchased $7.6 billion of Berkshire stock in the third quarter, bringing the nine-month total to $20.2 billion. Berkshire bought back a record $24.7 billion of its shares in 2020. — CNBC's Nate Rattner contributed to this story.
Gerald Miller | CNBC
Berkshire Hathaway shares have been on a tear on the back of a recent rotation into value and cyclical stocks, setting up the conglomerate to be the next in line for the trillion-dollar market capitalization club.