Warren Buffett's Berkshire Hathaway is Friday's IBD Stock Of The Day as the massive conglomerate, which is reportedly in talks to sell its real estate brokerage business, emerged unscathed by the S&P 500 correction. Berkshire rose in a buy range as investors sought safe haven in companies featuring reliable earnings streams, geographic diversification and low volatility.
Some of Berkshire's portfolio holdings also are near buy points or hitting new highs, including Chinese EV giant BYD, Swiss insurer Chubb, grocery chain Kroger, Irish insurance broker and consultant Aon, aerospace and defense supplier Heico and a number of Japanese firms, including Mitsubishi UFJ Financial and Sumitomo Mitsui Financial.
Berkshire Divestment Talks
The Wall Street Journal reported that Berkshire was in talks to sell HomeServices of America, a real estate brokerage with about 820 brokerage offices, to its larger rival Compass.
The talks follows a legal settlement last year involving HomeServices and three other major brokerage firms to resolve antitrust allegations. The changes wrought by that probe may lead more people to buy homes without a real estate agent.
Berkshire Hathaway Earnings
Berkshire's defensive quality makes it a relatively safe haven when growth stocks go wobbly. However, Warren Buffett's company really stood out in this correction thanks to its knockout earnings report on Feb. 24.
Berkshire's earnings cover both its investment income and its stable of operating companies, such as Geico, Duracell, Dairy Queen, Fruit of the Loom and railroad operator BNSF.
For Q4, Berkshire reported operating profit soared 71% to $14.5 billion, buoyed by insurance operations and investment income. On a per-share basis, Berkshire's earnings came in at $6.74, blowing past estimates for $4.62.
Buffett wrote in a letter to shareholders that "property-casualty insurance pricing strengthened during 2024, reflecting a major increase in damage from convective storms. Climate change may have been announcing its arrival. However, no 'monster' event occurred during 2024."
However, Berkshire's earnings strength was narrow. "In 2024, Berkshire did better than I expected though 53% of our 189 operating businesses reported a decline in earnings," Buffett wrote.
Warren Buffett Played It Safe
Berkshire Hathaway's results got a lift from "a predictable large gain in investment income as Treasury Bill yields improved and we substantially increased our holdings of these highly liquid short-term securities," Buffett wrote.
Berkshire was a net seller of stocks for a ninth-straight quarter. Its cash hoard hit a record $334 billion due to strong earnings and stock sales vs. $325.2 billion at the end of Q3.
Berkshire's cash holdings equal about 30% of its $1.1 trillion market cap. During the final quarter of 2024, Berkshire sold several stocks including Bank of America. Apple is Berkshire's top holding.
Amid ongoing stock sales, Buffett said Berkshire's ownership in "marketable equities" moved down in 2024 from $354 billion to $272 billion. But, he added, "the value of our non-quoted controlled equities increased somewhat and remains far greater than the value of the marketable portfolio."
Meanwhile, Berkshire Hathaway bought back none of its own shares for a second consecutive quarter.
BRKB
Berkshire Hathaway stock rose 1.8% to 513.47 in Friday afternoon stock market action. BRKB is in a buy zone above a 491.67 buy point from a cup base. A correcting market is not a good time to open new positions or add to existing ones.
Berkshire initially broke out after its Feb. 24 earnings report, then proceeded to remain within the buy zone all through the correction that left the S&P 500 10.1% below its Feb. 19 record closing high as of Thursday's close.
Berkshire's relative strength line, the blue line in IBD charts that tracks a stock's progress vs. the S&P 500, is hitting a record high, confirming its leadership.
In the absence of a follow-through day for the S&P 500 or Nasdaq, investors are advised to stick to stocks that aren't especially volatile, those with a 21-day average true range of around 3 or below. That metric is available on IBD's MarketSurge. BRKB stock fits that profile with a 21-day average true range of 1.92%.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
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