Warren Buffett’s long-term focus pays off again as Berkshire Hathaway passes Meta Platforms in value

Published Fri, Feb 4 202212:59 PM ESTUpdated Fri, Feb 4 20223:04 PM EST

Warren Buffett is having the last laugh as his old-school Berkshire Hathaway surpassed tech pioneer Meta Platforms in market value, thanks to a slew of stock bets paying off from Apple to big banks and Japanese trading houses. Class B shares of the conglomerate have gained 5.5% in 2022, outperforming the S & P 500 by more than 10 percentage points. The recent rally pushed Berkshire's market cap above $700 billion, overtaking Facebook parent Meta in the No. 6 spot on the list of most valuable U.S. public companies. Berkshire is one of the only nontech companies on the pyramid. Its operating business is a patchwork of companies focused on the traditional backbone of the economy, from railroads, to batteries, insurance, home furnishing and retail. Tech stocks, especially the frothier parts of the market, have been hard hit in the new year as investors rotated out of high-flying names amid a spike in bond yields and expectations that the Federal Reserve will raise rates multiple times this year. The Nasdaq Composite has dipped into correction territory, falling more than 10% from its record high. Meta shares dropped 30% in the past month as the company forecast weaker-than-expected revenue growth. This has been less of a concern for the "Oracle of Omaha." The 91-year-old investing legend is reaping profits from his long-term conviction bets that are benefiting from an economic comeback from the coronavirus pandemic . A $40 billion stake in Bank of America proved to be a winning wager as lenders came back in favor with rising rates. Meanwhile, the conglomerate's massive holding in Apple , which makes up 40% of Berkshire's equity portfolio, has made more than $120 billion on paper . Apple has fared relatively well in 2022's tech rout, dipping about 2.8% in the new year. There's more good news. The five leading Japanese trading companies Buffett acquired stakes in leading up to his 90th birthday just posted record quarterly earnings. The companies — Itochu Corp ., Marubeni Corp. , Mitsubishi Corp. , Mitsui & Co . and Sumitomo Corp . — invest in overseas energy and metals assets, which benefited from a huge rebound in commodity prices. "I think Berkshire's equity investment strategy, which seems to be bar-belled between select financial and technology names, is an attractive compliment to its operating strategy, which tends to favor value-oriented businesses like insurance, railroads, energy and consumer staples," said Cathy Seifert, Berkshire analyst at CFRA Research. Berkshire's comeback perhaps redeemed Buffett's largely criticized move to sell all of his airline bets at the height of the pandemic. He raised eyebrows in 2020 when he revealed he dumped the entirety of his airline investments, worth north of $4 billion, a rare move for the buy-and-hold investor who received criticism for taking a loss on his investment. Looking back, the loss from the airline trade has long been made up for by Berkshire's huge returns from Apple and other winning bets, and airline shares after an initial pop have largely stagnated. Buffett could still be right about the fundamental changes in the airline industry as these stocks still haven't wiped out pandemic losses. The Omaha, Nebraska-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. Berkshire is slated to release its fourth-quarter earnings as well as its annual report on Feb. 26. The company saw a double-digit increase in its operating profit last quarter.

Berkshire Hathaway Chairman and CEO Warren Buffett.

Andrew Harnik | AP