Berkshire, Lilly within sight of $1 trillion

Big Tech stocks created, and have so far dominated, the trillion-dollar club in the United States. For the first time, there's a race brewing for an outsider to join their ranks.

Rallies since the start of the year in Warren Buffett's Berkshire Hathaway Inc. -- which has its hands in businesses ranging from Dairy Queen to Fruit of the Loom -- and weight-loss drug darling Eli Lilly & Co. have the two jockeying for a spot in that top echelon of S&P 500 stocks. The two firms couldn't be more different -- from each other and the tech giants they're chasing.

The Omaha, Neb.-based conglomerate has slowly but steadily marched upward to command a market valuation of nearly $900 billion. In contrast, the world's largest drugmaker has momentum on its side after rapidly tripling in value over the past two years. A recent paradigm shift in how the world treats obesity has left Lilly's value standing at more than $700 billion.

As Wall Street obsesses over the narrow breadth of the stock market's ascent, the two firms provide a key foil for the so-called Magnificent Seven which have held sway over the market. Fascination with the tech giants has juiced their valuations and shot the S&P 500 well ahead of an equal-weighted version of the benchmark that dilutes the megacaps' impact.

"You've got two other companies besides the tech names that are exciting to talk about," said Matt Orton, chief market strategist at Raymond James Investment Management. "It gets the conversation started that there's a lot working within the market besides megacap tech."

"That's generally a good thing -- to highlight that there is in fact non-tech breadth out there," he added.

Berkshire and Lilly have taken very different paths to their current valuations, the shares climbing roughly 15% and 59% last year, respectively. While Buffett's firm reported growing operating earnings from its medley of insurance, energy, railroad and other businesses, Lilly has skyrocketed on hopes for demand for its blockbuster weight-loss drugs, Mounjaro and Zepbound.

If either stock were to replicate its 2023 gains in the months ahead, they would surpass a market capitalization of $1 trillion, joining the ranks of tech giants including Apple Inc., Microsoft Corp. and Nvidia Corp.

Such returns are never guaranteed, not even for the Oracle of Omaha, who reminded investors of that recently.

"All in all, we have no possibility of eye-popping performance," Buffett wrote in his annual letter to shareholders over the weekend, cautioning that the company's size constrains its ability to make needle-moving deals.

Still, a deal could be one catalyst for the stock. "If it's seen by the market as a smart play -- which Warren Buffett typically does -- they could make that bounce over the trillion-dollar goal line," said Quincy Krosby, chief global strategist for LPL Financial.

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