Berkshire Hathaway’s shares surged to record highs on Friday, marking their highest closing levels since March 28. This notable uptick was driven by a resurgence in investor appetite for value stocks, a trend that has been gaining momentum recently.
The rally in Berkshire’s shares coincided with strong performances in the broader market indices tracking value stocks, such as the S&P 500 Value Index and the Russell 1000 Value Index, which posted gains of 2.5% and 2.8% respectively over the past week. These indices had previously been trading in a relatively narrow range since March, suggesting that value stocks were finally breaking out of their earlier stagnation.
In contrast, growth stocks saw more subdued gains during this period, with the S&P 500 Growth Index recording only marginal increases while the value index surged ahead. This shift underscored the strongest relative performance of value stocks compared to growth stocks since April, according to Dow Jones Market Data.
Berkshire Hathaway’s significant holdings in ETFs that track both the Russell 1000 and S&P 500 value indices played a pivotal role in its own stock’s surge. These holdings not only reflected Berkshire’s strategic positioning in the value investing space but also contributed directly to its recent gains as broader market sentiment turned favorably towards value-oriented investments.
The recent trading activity also hinted at a broader market rally, suggesting potential for sustained momentum in value stocks without undermining growth stocks. Investors interpreted favorable inflation data as a catalyst for this shift, boosting expectations that the Federal Reserve could pivot towards interest rate cuts in response to economic conditions. This economic backdrop is particularly favorable for sectors traditionally associated with value investing, such as financials and industrials.
For Berkshire Hathaway, these developments came amidst a period of market volatility, including an unusual trading glitch in early June that briefly misrepresented the value of its Class A shares. Despite these challenges and occasional strategic divestments, notably from its Apple Inc. holdings earlier in the year, Berkshire’s overall portfolio resilience was evident. Apple’s subsequent rally since June, driven by the introduction of new AI-infused product features, proved beneficial and reaffirmed its significant role within Berkshire’s equity holdings.
Overall, Berkshire Hathaway’s strong performance in 2024, with its Class A shares up 17.9% and Class B shares up 19% by the end of Friday, outpaced the broader S&P 500’s gains during the same period. This resurgence highlights Berkshire’s ability to navigate evolving market dynamics adeptly and capitalize on opportunities across both value and growth sectors, reinforcing its position as a cornerstone of the global investment landscape.