Berkshire shares jump after posting huge profits as the value of Buffett's group approaches $1 trillion

Warren Buffett tours Berkshire Hathaway's annual shareholders meeting headquarters in Omaha, Nebraska.

David A. Grosjean | CNBC

Shares of Berkshire Hathaway rose Monday after Warren Buffett's group reported strong fourth-quarter earnings over the weekend.

Berkshire's Class B shares jumped 2.3% in premarket trading, and are set to add to their 17% gain already this year. Berkshire closed Friday with a market cap of $905.5 billion, according to FactSet.

Berkshire on Saturday reported fourth-quarter operating profit of $8.481 billion, up about 28% from $6.625 billion from the same period a year ago, driven by big gains in its insurance business. Operating profits refer to profits from companies across insurance, railways and utilities.

Meanwhile, Berkshire's cash levels have also swelled to record levels. The group retained cash of $167.6 billion in the fourth quarter, exceeding the record of $157.2 billion recorded by the group in the previous quarter.

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Berkshire Hathaway Class A

However, one analyst said he expects the stock to be fairly valued, saying any upside from the group's rosy earnings outlook has already been priced into the stock.

“BRK shares have significantly outperformed their financial services peers during 2023, supported by a relatively strong earnings outlook. We continue to expect strong earnings from BRK's diverse portfolio of operating companies,” Edward Jones' James Shanahan wrote on Saturday. “But in our view, the current share price reflects these positives.”

Investors shouldn't expect that Buffett's often blunt comments will help him reach $1 trillion faster, either. In fact, the billionaire investor said in his annual letter also released last weekend that he expects Berkshire to only slightly outperform the average company going forward, especially as the group reaches a net worth of 6% of the total S&P 500 companies.

“With our current mix of companies, Berkshire must do a little better than the average American company and, more importantly, it must also operate with a materially lower risk of permanent loss of capital,” Buffett said. Anything beyond “a little better,” Buffett said. Despite that.” “It is wishful thinking.”

Buffett added that only a few companies are likely to “really move the needle” for a company through acquisitions. Berkshire's last major deal was in 2022, when it bought the insurance company and conglomerate Alleghany for $11.6 billion.

— CNBC's Michael Bloom contributed to this report.