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Since The Motley Fool’s mission statement is to make the world smarter, happier and richer, we asked some of our freelance writers which US stocks they think might be next to crack the $1trn threshold — potentially making shareholders very happy indeed!
What it does: Warren Buffett’s diversified holding company uses an insurance float model to invest in dozens of businesses.
By Charlie Carman. Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) has broken the $700bn market capitalisation barrier, but it’s never reached the trillion-dollar threshold. I think that’s only a matter of time. As I write, the company would need to deliver a 36% share price gain to achieve this landmark.
From 1965 to 2022, Berkshire Class A stock achieved a 19.8% compound annual growth rate. Returns have slowed since the turn of the millennium, but the annual average remains firmly in double digits.
Recent results have been encouraging. In the first quarter, Berkshire posted a $35.5bn profit and accelerated its share repurchases, buying back $4.4bn of its own stock.
A major risk facing the company is the potential loss of investor confidence that could result from its CEO’s looming departure. After all, Buffett is 92.
However, his successor Greg Abel has already taken on many responsibilities, suggesting the handover could be less problematic than some fear.
Charlie Carman owns shares in Berkshire Hathaway.
What it does: Berkshire Hathaway is a diversified conglomerate that operates in sectors including insurance and retail and owns a stock portfolio.
By Christopher Ruane. The famed investor Warren Buffett has built Berkshire Hathaway over the course of decades.
Since taking the company over in 1965, Buffett has achieved a compounded annual gain of 19.8% in its per-share market value.
Some years are markedly better than others. In general, I think the defensive nature of many Berkshire businesses means that it can do well when the wider market stumbles. In 2007, for example, its compounded annual gain was 28.7% while the benchmark S&P 500 only achieved 5.5%.
The economy looks weak again to me, but one big difference is Berkshire’s massive position in Apple. If tech stocks including Apple fall, that could hurt Berkshire’s share price.
But I think the company’s broadly defensive asset base and Buffett’s steady hand on the tiller could help Berkshire ride out the next storm well. Its shares have risen 81% in five years and today the market capitalisation is $736bn.
Christopher Ruane does not own shares in any of the companies mentioned.
What it does: Eli Lilly is a global healthcare company with products spanning oncology, immunology, diabetes and neurology.
By Ben McPoland. I think biopharma giant Eli Lilly (NYSE: LLY) could become the newest $1trn stock. Its market cap of $435bn already makes it one of the largest companies in the world.
The firm has a packed late-stage pipeline of potential blockbusters. One is its Alzheimer’s treatment, donanemab,which has successfully slowed memory and thinking decline in a rigorous phase 3 trial.
A second is Mounjaro, which is a medicine already used by people with type 2 diabetes. It is currently being assessed by US regulators and the NHS as a repositioned treatment for weight loss.
Needless to say, a proven and safe treatment for obesity (which is a global health issue) could be a huge deal for the company. Indeed, some analysts think it could become the biggest selling drug ever. And it could be approved by the end of this year.
One risk is that this huge potential is already priced into the stock, with its trailing P/E of 72. Any disappointing regulatory news could hit the share price hard.
Ben McPoland does not own shares in Eli Lilly.