What is Berkshire Hathaway?
Berkshire Hathaway, headquartered in Omaha, Nebraska, is an influential holding company that owns a multitude of businesses including GEICO and Fruit of the Loom, to name a few. Under the visionary leadership of its chair and CEO, Warren Buffett, the company has expanded its scope from a struggling textile milling operation to one of the world’s largest companies by market capitalization.
Key Takeaways
- Berkshire Hathaway, a powerhouse in the investment world, has seen massive growth under renowned value investor Warren Buffett’s leadership since the 1960s.
- The company’s market capitalization stands at over $700 billion.
- As of May 2023, Berkshire’s class A shares are among the most expensive in the stock market, trading close to half a million dollars per share.
- Aside from owning a variety of private businesses, Berkshire holds substantial minority interests in leading public companies, such as Apple.
- Greg Abel is designated as Warren Buffett’s successor, despite Buffett having no immediate plans for stepping down.
Understanding Berkshire Hathaway
Warren Buffett took control of Berkshire Hathaway in the mid-1960s and initiated a transformative strategy, redirecting cash flows from the core textile business into diversified investments. By May 2023, Berkshire Hathaway achieved over $715 billion in market capitalization, marking its place among the world’s largest publicly traded entities.
Berkshire Hathaway’s long history demonstrates extended success through strategic investments and acquisitions. It ranks as the sixth-largest public company globally by market capitalization as of May 2023. The company’s stock is listed on the New York Stock Exchange in two classes—A shares and B shares. Class A shares reached an astonishing trading value of over $500,000 per share in May 2023, while the more accessible Class B shares were trading around $325 each.
A significant portion of Berkshire Hathaway’s holdings lies within its insurance subsidiaries, but it also manages an impressive variety of businesses globally, including but not limited to Duracell, International Dairy Queen, Pampered Chef, NetJets, and GEICO. Additionally, Berkshire maintains a substantial equity portfolio comprising prominent public companies like Apple, Bank of America, and United Parcel Service, with a total market value exceeding $346 billion as of December 31, 2022.
Strategic Investments and the Power of Float
Early on, Buffett brilliantly decided to utilize the ‘float’ from his insurance operations for long-term investments. This approach involved over-weighted trusted investments rather than a diluted diversified portfolio. Buffett’s stellar investing acumen has fueled Berkshire’s impressive growth, turning its annual shareholder meetings into major events for value investing enthusiasts and a magnet for extensive media coverage.
3,641,613%
The towering return of Berkshire Hathaway’s stock from 1965 to 2021. In contrast, the S&P 500 logged an impressive 30,209% during the same period. In annual terms, Berkshire’s stock attained an average return of 20.1% compared to the S&P 500’s 10.5% gain.
Succession and Control: The Future Beyond Buffett
Succession planning has been a critical issue for Berkshire, especially given Warren Buffett’s considerable impact and advanced age of 92 years by 2022. The focus has been whether Buffett’s successor can perpetuate the company’s exceptional performance.
In 2010, Buffett outlined that a combination of a CEO and multiple investment managers would succeed him. By 2011, Todd Combs and Ted Weschler were designated as two of these investment leaders. In 2018, Ajit Jain was appointed to handle all insurance operations, whereas Greg Abel assumed control over non-insurance businesses. Abel emerged as the likely heir alongside Buffett’s consistent backing.
On May 1, 2021, Charlie Munger, vice-chair of Berkshire Hathaway, unofficially declared Greg Abel as Warren Buffett’s successor. Abel currently serves as CEO of Berkshire Hathaway Energy and as vice chair overseeing non-insurance operations.
Who is Warren Buffett?
Warren Buffett, the driving force behind Berkshire Hathaway, is celebrated globally for his business acumen and diligent investment strategies, creating substantial shareholder wealth. Despite being among the wealthiest, his frugality and humble demeanor have endeared him to many.
What is Value Investing?
Value investing focuses on acquiring stocks undervalued compared to their intrinsic value, in anticipation of their market price correcting over time. Warren Buffett’s trajectory is a prime example showcasing the tremendous success attainable through disciplined value investing.
What is a Class A Share?
Class A shares usually afford shareholders superior voting rights than other classes, commonly held by executives to maintain control during adverse situations, such as hostile takeovers.
The Bottom Line
Berkshire Hathaway, heralded by Warren Buffett, encompasses a vast array of private enterprises and sizable interests in public corporations such as Apple. With a market capitalization surpassing $715 billion, it ranks sixth in the global public company panorama. The company’s sprawling success is intricately tied to Buffett’s value investing strategy. The baton of leadership is set to pass to Greg Abel, underscoring the prudent succession plan amid Buffet’s extraordinary legacy.
Related Terms: GEICO, Fruit of the Loom, Apple, Market Capitalization, Value Investing.
References
- Companiesmarketcap. “Market capitalization of Berkshire Hathaway (BRK-A)”.
- NYSE. “Berkshire Hathaway Inc. BRK.A”.
- Berkshire Hathaway. “Links to Berkshire Subsidiary Companies”.
- Fintel. “Berkshire Hathaway Inc - Warren Buffett - 13F Filing - 2020-12-31”.
- U.S. Securities and Exchange Commission. “Form 13F Summary Page”.
- Berkshire Hathaway. “2021 Annual Report”.
