U.S.-based companies reaching the coveted $1 trillion mark was once an improbable notion, but in early August 2018, Apple defied expectations. However, the market faced setbacks due to the U.S.-China trade war and Federal Reserve uncertainties, leading to a correction. While Apple and other tech giants later recovered, the COVID-19 pandemic triggered a substantial sell-off. In 2022, only Apple, Microsoft, and Alphabet remained above the $1 trillion market cap.
Tesla: A Volatile Journey to Trillion Dollar Valuation
Tesla’s stock exhibited notable volatility, doubling in 2023 but plummeting around 50% from its peak. Although Tesla met its 2023 production goal, the company faced sluggish growth, declining profits, and reduced margins due to price cuts in response to weak demand. Elon Musk’s discomfort with accelerating Tesla’s AI and robotics leadership without increased voting control added to the uncertainty. Despite the roller coaster of Tesla’s stock, the company remains unrivaled in the EV market, poised for international expansion, and committed to releasing affordable EV models.
Six years ago, Tesla grappled with inconsistent profitability and production scale. Today, with a robust balance sheet and cash flows, Tesla is better equipped to withstand setbacks and could gain market share during an industry downturn, making it a balanced risk-reward prospect amid volatility.
Berkshire Hathaway: Unveiling Hidden Value
Close to a market cap of $800 billion, Berkshire Hathaway, led by Warren Buffett, emerges as the next closest contender to reach the trillion-dollar threshold after Meta. The value inherent in its public equity portfolio alone dwarfs many other companies, with the rest of its business holding significant untapped potential.
Berkshire’s diverse portfolio of outright business ownerships and stakes in private enterprises makes it a complex entity. Its insurance businesses, including GEICO, Berkshire Hathaway Primary Group, and Berkshire Hathaway Reinsurance Group, yield a treasure trove of value through predictable earnings and a substantial float of approximately $164 billion.
Berkshire’s ownership of BNSF railroad, generating nearly $6 billion in net earnings, and its 92% stake in Berkshire Hathaway Energy underscore the multifaceted layers of hidden value embedded within the conglomerate.
The Rise of Berkshire Hathaway: Unstoppable Growth
Potential for Future Growth
Investing in a stock simply because it’s on an upward trajectory is akin to inviting financial peril. To commit to stock shares, one must fundamentally rationalize their anticipated future value. Tesla, a pioneer in its industry, indicates clear avenues for growth. In contrast, Berkshire Hathaway, a conglomerate amalgamating both value and growth from diverse sectors, holds substantial potential.
Despite performing well over the past year, these stocks might witness a downturn should the market experience a sell-off. However, should the market continue its rally, it is conceivable to envision both companies’ valuation surpassing the $1 trillion mark by the year’s end. Even over the span of three to five years, it would be genuinely astonishing if the worth of either company dipped below $1 trillion.
Buffett’s Strategic Moves
Berkshire Hathaway’s decision to shed around $90 billion of Chevron stock and consequently generating a net earning of $12.51 billion in the year 2022 from its manufacturing, service, and retailing businesses is a testament to its strategic acumen. At conservative valuations, the combined worth of its BNSF railroad and aforementioned business arms would exceed $180 billion. When subjected to reasonable valuations, Berkshire’s worth could effortlessly soar past the $1 trillion mark.
Berkshire seems poised to not only surmount but maintain its $1 trillion valuation, owing to possibilities such as incremental business growth over time or multiple expansions for its current assets.
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