Investors turn to Berkshire Hathaway amid tech stock volatility

Berkshire’s class B stock has risen 13.6% this year, surpassing the S&P 500’s 7.8% gain. This positive performance coincides with a shift away from technology stocks that previously benefited from the artificial intelligence boom. Since October 1st, Berkshire’s stock has climbed 14%, while the S&P 500 has declined by approximately 4%.

This trend echoes past periods of significant market instability. In 2022, Berkshire Hathaway gained 4% during a period when the Federal Reserve’s interest rate hikes caused an 18% drop in the S&P 500.

Despite the positive stock performance, Berkshire’s investment portfolio has not been entirely shielded from market fluctuations. The company’s third-quarter earnings report, released Saturday, revealed a 46% decrease in investment gains, totaling $9.4 billion.

Alphabet, American Express, Apple, Bank of America, and Coca-Cola remained Berkshire’s primary stock holdings during the quarter. A more detailed report is expected later this month, but the latest filing indicates that Berkshire invested $2.4 billion in stocks while divesting $2.8 billion.

The conglomerate increased its holdings in “commercial, industrial, and other” equities by $2.3 billion and reduced its stake in “banks, insurance and finance” by $400 million.

CEO Greg Abel, who assumed the leadership role earlier this year, has been actively utilizing Berkshire’s substantial cash reserves and accelerating stock repurchases. The company repurchased $9.6 billion in stock during the third quarter, doubling the pace of the previous quarter, and an additional $2 billion in the first four weeks of the fourth quarter.

Berkshire Hathaway’s diverse portfolio includes established businesses such as railroad BNSF, Brooks running shoes, See’s Candies, and Forest River RVs. In July, Abel furthered this strategy by agreeing to acquire home builder Taylor Morrison for $6.8 billion, ending a period without major acquisitions.

Berkshire’s focus on traditional industries has yielded positive results, with strong profits reported from its railroad, energy, and manufacturing businesses, although insurance underwriting experienced a downturn. The AI boom has spurred growth in the tech sector and related industries, contributing to a U.S. GDP expansion of 3.4% in the third quarter, up from 2.2% in the second.

However, recent Democratic victories in key states like Texas, Ohio, and Georgia, which are hubs for data center construction, are anticipated to potentially slow down the AI buildout and overall economic growth.