With fresh new highs the past week, momentum is clearly on the side of the S&P 500, and funds focused on the index can build off the strength with Berkshire Hathaway’s recent operating profit numbers.
Run by CEO and famed investor Warren Buffett, the holdings company saw its operating profit and cash increase despite an increase in share buybacks.
“Berkshire Hathaway saw another double-digit increase in its operating profit thanks to a continuous rebound in it railroad, utilities and energy businesses from the pandemic, while the company’s cash pile hit a record high as Warren Buffett continued to sit on the sidelines,” CNBC reports. “The conglomerate reported operating income of $6.47 billion in the third quarter, rising 18% from $5.48 billion in the same quarter a year ago, according to its earnings report released on Saturday.”
Berkshire can thank the economic reopening, which allowed a number of its businesses to operate at their pre-pandemic capacities. Furthermore, the railroad, utilities, and energy segment grew 11% year-over-year to $3.03 billion in Q3.
“Beginning in the third quarter of 2020, many of our businesses experienced significantly higher sales and earnings relative to the second quarter, reflecting higher customer demand,” Berkshire says in the report. “The extent of the effects over longer terms cannot be reasonably estimated at this time.”
A Momentum ETF to Build Off Berkshire
With 6% of its holdings allocated to Berkshire Hathaway, ETF investors can build off the success of the holdings company with the Invesco S&P 500 Momentum ETF (SPMO).
SPMO seeks to track the investment results (before fees and expenses) of the S&P 500 Momentum Index (the “underlying index”). The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index, which is designed to track the performance of approximately 100 stocks in the S&P 500® Index that have the highest “momentum score.”
In general, momentum is the tendency of an investment to exhibit persistence in its relative performance; a “momentum style” of investing emphasizes investing in securities that have had better recent performance compared to other securities.
“The Invesco S&P 500 Momentum ETF tracks an index of the 100 stocks in the S&P 500 that have had better recent price performance compared with peers,” an ETF Database analysis says. “The methodology measures the percentage change in stock prices over the past year, excluding the most recent month, and then adjusts for volatility. The portfolio is then weighted based on a combination of company size and momentum score.”
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