Haven’t you ever heard the name, Warren Buffett? He is an American businessman and philanthropist who is one of the wealthiest persons on the planet having more than $100 billion net worth. This man is the dominant person of Berkshire Hathaway, which has been one of the biggest multinational companies in the world because of the diligence and hard work of Buffett.
Berkshire Hathaway has different kinds of businesses in the international market. It owns some powerful public and private companies, and buys shares, and invests behind some other companies. Do you have sufficient knowledge about this company and how does it work?
Okay, to know elaborately about the company, go through the article. Here, I’m going to illustrate some important facts about Berkshire Hathaway. So, let’s go on.
What is Berkshire Hathaway?
Berkshire Hathaway, the world’s one of the broadest companies, is a conglomerate holding shareholders for a multitude of businesses. A Holding business is a corporation that owns plenty of voting stock in the subsidiary in other companies to exercise power over them and their businesses. And this giant company can reap a good amount of investment from the dominated companies. Berkshire Hathaway is such a company that dominates several companies with a minimum amount of investment and obtains a certain amount of profit from them.
Although Berkshire Hathaway was originally a textile manufacturer, now it possesses controlling interests in dozens of big companies in the world such as Geico, Heinz, Benjamin Moore, Fruit of the Loom, and Dairy Queen. Over the years, it has been occupying these companies, and the number of subservient companies is increasing day by day. In addition to the share and investment in these companies, it also has particular subsidiaries in the insurance and home services industries.
Berkshire Hathaway is directed by the investors and sharers, but in particular, by the chairman and CEO, Warren Buffett. This man is known as the Oracle of Omaha, as he is one of the most successful businessmen and entrepreneurs, even one of the richest men in the world, who came from Omaha, America. During the 1960s, he bought stock in the company and rose to prominence within a few years. Over the years, he has taken control of the company and has become the key person of the giant stock.
The headquarters of Berkshire Hathaway is located in Omaha, Nebraska, America. But it is serving throughout the world.
How Buffett Did It: Building Berkshire Hathaway:
What does Berkshire Hathaway do?
What Berkshire Hathaway does is a complicated work zone. The company owns multiple subservient companies including public and private, as well it operates insurances, freight rail transportation, energy generation, distribution, manufacturing, and retailing, and invests in these sectors.
Besides, Berkshire Hathaway provides two classes of stock. The first one is the class A shares that is one of the most expensive shares in the world stock market. The value of a single share of this class is more than $420,000 till May 2021. After that, the class B shares are much more affordable regarding the cost. It was inaugurated in 1996 to expand the shares within the hands of the common people.
From 2019, it also has brought out various commodities and services in the market that include manufacturing computers and electronic products, fractional aircraft ownership, providing insurance, confectionery, serving food products, grocery, jewelry sales, producing clothing, automotive products, and much more.
What is the history of Berkshire Hathaway?
The foundation of Berkshire Hathaway is much more interesting and to know the history we have to go back many years. Originally, this company came from two Massachusetts textile farms. One was the Valley Falls Company founded by Oliver Chace in 1839. And another one was the Berkshire Cotton Manufacturing Company that was established in 1889.
On the one hand, the Valley Falls Company was incorporated with the Hathaway Manufacturing Company in 1929 that was primarily established in 1888. On the other hand, Berkshire Cotton Manufacturing Company also changed its name in 1929 and became the Berkshire Fine Spinning Associates. And eventually, these were merged and named Berkshire Hathaway Inc. in 1955.
Hereafter, Warren Buffett along with a group of investors took complete control over the company during 1965. On account of his continuous struggle, outstanding intelligence, and value investing strategy, Buffett became the prominent figure of the company.
By the year of the 1990s, he purchased several undervalued stocks and took management of various companies. At that time, he transformed it into a complete holding company by ending all the textile operations of Berkshire Hathaway.
Since then, it has been exercising multinational businesses in different fields by buying shares, providing interests, manufacturing, marketing, clothing, retailing, and even in tech, transportation, and foods.
What companies are under the Berkshire Hathaway umbrella?
As a diversified holding company, Berkshire Hathaway owns multiple companies and is a shareholder of numerous companies around the world. As the dominating figure, Buffett started to take control over different kinds of companies and purchase investments in some others.
Initially, Buffett was inclined to the insurance companies for the first time. Therefore, he bought National Indemnity Company and National Fire & Marine Insurance Company in 1967. During 1985, he closed textile activities and turned it into a holding company completely. Then, he paid for an equity stake in the Government Employees Insurance Company (GEICO) which was the essence of today’s insurance operations.
Thus, Berkshire Hathaway has become a giant stockholder by purchasing stocks on some other prominent institutions including General Reinsurance in 1998, Benjamin Moore in 2000, Fruit of the Loom in 2002, Burlington Northern Santa Fe Corporation in 2010, etc.
According to the survey, Berkshire Hathaway completely owns almost 50 subsidiaries in the world. Some of them illustrate their name which are Berkshire Hathaway Home Services of America, Berkshire Hathaway Direct Insurance Company, Berkshire Hathaway Energy Company, Berkshire Hathaway Automotive, Berkshire Hathaway Homestate Companies, and so on.
Besides, almost dozens of other public and private companies are also occupied by Berkshire Hathaway. These are Geico, BNSF Railway, Duracell, Justin Boots, MedPro Group, Clayton Homes, Benjamin Moore & Co., Lubrizol Corporation, Acme Brick Company, Helzberg Diamonds, Nebraska Furniture Mart, Dairy Queen, McLane Company, etc.
Apart from these, the company also obtains a large share of fortune from several other corporations and brands which are not occupied by it. For example, it gains almost 14% of American Express, 10% of Coca-Cola, 5% of Apple Inc., and so on.
Moreover, in 2020, it has purchased 5% of shares of five giant Japanese trading companies that are Itochu Corp, Marubeni Corp, Sumitomo Corp, Mitsubishi Corp, and Mitsui & Co. Ltd.
In addition, it has shares in Wells Fargo, Delta Airlines, American Airlines Group Inc., Bank of America, General Motors, Johnson and Johnson, Chevron Corporation, and the list is massive.
When did Berkshire Hathaway go public?
Although Berkshire Hathaway was organized in 1955, it went public in the 1960s as Warren Buffett took over the management and possession of it. Since then, Buffett started buying shares of other insurance companies and became famous within some years. In particular, when it purchased an amount of interest in the National Indemnity Company and National Fire & Marine Insurance Company, and Geico in 1967 and 1996 respectively, it has become more familiar and renowned around the world.
How many companies does Berkshire Hathaway own?
As I said earlier, Berkshire Hathaway owns different kinds of companies from which some are fully owned and some are joint. At least 20 to 30 companies are completely owned by Berkshire that includes Geico, National Indemnity Company, Acme Brick Company, Benjamin and Moore, Brooks Sports, BNSF Railway Company, Dairy Queen, Duracell, Fruit of the Loom, Helzberg Diamonds, etc.
Besides, it has more than 50 subsidiaries from which Berkshire Hathaway gains a large share of interests by investing in them. These are Apollo, Coca-Cola, American Express, Delta Aires, Bank of America, Wells Fargo, General Motors, Kraft Heinz, and so on.
What kind of stock is Berkshire Hathaway?
Berkshire Hathaway has two kinds of stock including Class A Stock (BRK-A) and Class B Stock (BRK-B). The shares of Class A are the most expensive shares on the New York Stock Exchange in 2021 as the price is more than $420,000 per share. In general, this share is pricey and superfluous.
So, when Buffett noticed that the customers were not able to keep pace with the Class A shares, he initiated the Class B shares in 1996 to make them affordable for the common shareholders.
And the main reason for inaugurating the Class B stock was to attract investors directly. And Buffett became triumphant over his motif. Nowadays, the price of the Class B Stock is almost $300 and thus, is accessible for common investors.
What is the net worth of Berkshire Hathaway?
The net worth of Berkshire Hathaway, the world’s one of the most top giant corporations, is more than $873 billion by the end of 2020. Its Total equity is $443.2 billion and the revenue is more than $245 billion at the end of the previous year. In addition, it has profited $42.5 billion in 2020.
Because of its massive net worth, Berkshire Hathaway has been the third-largest company in the world according to the ranking of the Forbes Global 2000 2021.
Why is Berkshire shares so expensive?
The price per share of the Class A Stock is more than $420,000 that is expensive and extravagant. An ordinary person may not be able to purchase a share of the Class A Stock because of this hefty price tag.
The prominent reason for being so expensive is that it doesn’t go through any stock splits. Even, it never has been split in the history of Berkshire Hathaway. And it is the key difference between the shares of Berkshire and the other popular holding companies of the world as most of the holding companies keep an advantage to split up shares to increase their shareholders.
An opportunity of splitting shares into many may raise seasonal and short-termed shareholders and decline the price of every share. That is why Buffett doesn’t keep any facility to split shares for the unserious traders who ponder to make quick money by utilizing this advantage. Rather, he treats his shareholders as partners, not investors. So, genuine investors and traders will purchase shares in Berkshire whether it is expensive or not, and they will be long-time customers.
Therefore, the price of the Class A Stock is more expensive as a result of its safety, longevity, and huge profits. Whoever is not able to buy shares from this class may choose Class B stock as the shares of this class are reasonable and any normal traders can afford it.
Is Berkshire Hathaway overvalued?
Indisputably, Berkshire Hathaway is a reliable shareholding company as well as profitable for the long-termed traders. Its financial condition and profitability are fair and modest. But, according to an analysis of the GuruFocus Value calculation, Berkshire Hathaway reveals many indications of being overvalued. The reason is the high percentage of business growth in the past.
The calculation shows that, when a company’s past business growth is excessive, the future return of that company will be less improving in contrast to the business growth. But, it is a delightful fact that because of the financial strength, consistent profitability, and long-term performance of Berkshire Hathaway, it carries less risk for the shareholders. Berkshire stock is much better than most other companies around the world.
Is Berkshire Hathaway a good investment?
Berkshire Hathaway has a glorious history due to fair investment in the market. And it is also a very trustworthy share business that anyone can invest his money in. Thus, it is a good investment as being a top-class and well-known company for considerable earnings.
But, the glory doesn’t remain eternal and that is an order of nature. Many analysts fear that Berkshire Hathaway may fall at risk in the future as Buffett is now at the sunset of his shiny career. After his departure, the company may face several kinds of legacy difficulties. Because of being a conglomerate, different heirs might create problems to take supremacy, draw the power and take control over it. Therefore, the shareholders may fall at risk of losing their shares and money.
Moreover, the company has some other complexities including issues of regulatory challenges and credit downgrade. In addition to these drawbacks, Berkshire has also experienced a fall of 3.6% revenue because of the Covid-19 pandemic in the previous year. In particular, its recent performances in IBM, Kraft Heinz, and Occidental Petroleum have flopped.
However, although these predicted problems are threats to the company, they will hopefully be successful over these difficulties.
How do Berkshire Hathaway shareholders make money?
Berkshire Hathaway shareholders are not rewarded by dividends. Instead, they profit from the increasing value of the company when the price of the shares is going up. There is another opportunity of repurchasing stocks which is the surest way to use funds intelligently, according to Buffett’s prospect. He thinks that by reinvesting money in new projects in place of allocating dividends, the money is used more efficiently than the shareholders themselves can utilize it. And, they mostly agreed with this policy of Buffett.
Does Berkshire Hathaway pay dividends?
Perhaps, not. Berkshire Hathaway doesn’t pay dividends to its shareholders. Instead, it likes to reinvest retained profits in the new projects and operations. Berkshire Hathaway allocated dividends only one time in the history of 1967.
Warren Buffett is a keen and brilliant entrepreneur. He knows well how to utilize money and infuse it to profit more and more. Having a clever perspective, Buffett prefers to reinvest the dividend behind new services, projects as well as existing companies to expand their reach and value.
Does Berkshire Hathaway own Tesla stock?
There is a hearsay that Buffett has recently owned Tesla or invested a huge amount in the Tesla stock. But, in an interview with Yahoo Finance, Buffett cleared that he had never invested in the Tesla Stock. He said that he had met Elon Musk, the CEO of Tesla, once or twice and talked with him for quite a while. He rejoined that he has no purpose to invest in the Tesla Stock in the future as it is a difficult business.
Berkshire Hathaway is one of the most successful, prolific, and leading multitude of business companies in the world. As a result of the value interest strategy of Warren Buffett, it has become renowned and celebrated over the years throughout the globe. Now, the corporation owns several individual companies as well as invests a good amount of percentage in them. Thus, it has a huge net worth occupying billions of dollars.
About Dawson Kutch
Dawson Kutch is a born and raised Alaskan who loves the outdoors and everything it has to offer. Kutch has been an avid hunter and fisher his entire life, and takes great pride in providing for himself and his family. While he enjoys spending time in the great outdoors, Kutch also has a passion for fashion and loves to stay up-to-date on the latest trends. In his free time, Kutch enjoys spending time with his wife and one young daughter. He is always looking to learn more and better himself, both as a writer and as a person.