This year's 30% increase, market value surpassing one trillion, is Berkshire Hathaway overpriced?

Despite Warren Buffett's cautious attitude towards Berkshire Hathaway's stock and the overall market, investors continue to buy a large amount of the company's stock, driving its valuation to multi-year highs.

On Wednesday, the closing price of Berkshire Class A shares was $715,778, relatively unchanged, while Class B shares rose by 0.4% to $478.57, both reaching new highs. Since the company announced strong second-quarter financial results in early August, Berkshire's stock price has risen by over 10%, with a year-to-date increase of over 30%, far exceeding the S&P 500's total return of 17%.

Berkshire's market value surpassed $1 trillion last week, just before Warren Buffett's 94th birthday. The current stock price is equivalent to 1.7 times its book value as of June 30, and is expected to be 24 times earnings per share by 2024, both higher than the average levels of the past 10 years.

Despite the enthusiasm of investors, Buffett appears indifferent to stock buybacks. The company repurchased only $345 million worth of stock in the second quarter, significantly lower than the $2.6 billion in the first quarter. This is the lowest quarterly repurchase amount in five years. In the first few weeks of July, the company did not repurchase any stock.

Buffett also maintains a cautious stance on the overall stock market. In the first half of this year, Berkshire Hathaway sold about $93 billion worth of stocks, mainly reducing its holdings in Apple. Barron's estimates that this figure may now be close to $100 billion.

Edward Jones analyst Jim Shanahan has a "hold" rating on the stock, believing that the current stock price already reflects the company's positive factors. UBS's Brian Meredith and KBW's Meyer Shields have target prices of $759,000 and $715,000 per Class A share, respectively, with "buy" and "market perform" ratings.

Despite potential headwinds to earnings, such as interest rate cuts that may affect the return on the company's huge cash reserves, Berkshire Hathaway is still seen as a safe haven in turbulent markets. The company holds a significant position in the property and casualty insurance industry, which has performed well recently due to strong pricing.

Buffett emphasizes the company's intrinsic value rather than book value. However, book value has been supporting the performance of the company's stock since Buffett took over in 1965. Assuming the current stock price remains unchanged, Berkshire's book value is expected to increase by over 2% as of September 30, reaching approximately $430,000 per Class A share.

Despite Berkshire Hathaway's strong performance in recent times, there are doubts about whether it can continue to outperform the S&P 500 index in the future given its current high valuation. The issue of Buffett's successor also adds uncertainty to the company's future