Berkshire Hathaway (BH) was a textile company that started in the 1800s due to a merger between Hathaway Company with Berkshire Fine Spinning Associates Inc. Warren Buffet currently owns it after buying enough shares in 1962 to acquire it in 1965.
While Berkshire was running the business until 1985, he branched out into the insurance market due to its safety and profitability. You can also use the money earned from this industry for other forms of investments.
It was the start of Warren Buffet becoming the prime investor of several multi-million-dollar corporations. Berkshire Hathaway is a popular insurance company and performs trade through its reinsurance subsidiaries that protect against large insurance payouts.
Berkshire Hathaway is run by Warren Buffet (CEO and Chairman) and Charlie Munger (Vice-Chairman).
History
Warren Buffet bought his first stock of Cities Service Preferred at $38/share at 11. He earned over $53,000 (today’s standards) by the age of 16. He has been stockpiling for decades as he found that it’s hard to pick and invest in stocks.
Buffet continuously invested till his early thirties when he discovered a New England textile company called Berkshire Hathaway. Hathaway Manufacturing and Berkshire Fine Spinning Associates merged in 1955 after decades of peak growth.
Hathaway Manufacturing initially consisted of 12,000 employees and generated annual revenues of over $120 million. As a result of the merger, the company became one of the largest textile firms in the country.
Since the textile industry collapsed by 1959, the company suffered immense loss and lost seven of 15 plants in New England. It made the company’s future very uncertain. Buffet had faith in the company despite its plights.
Buffet started buying Berkshire Hathaway stocks, at a price of $7.60 a share in 1962 after being impressed by the company’s long term financial success. He had over $13 million worth of Berkshire Hathaway stock and eventually assumed control of the company in May 1965.
Warren Buffet taking over the company was a saving grace as the company was failing and had only two manufacturing plants and just over 2,000 employees. He changed the industry the company was originally in and trod into the insurance industry.
This change proved to be the most effective change for the company. It is now one of the largest public firms in the world. Mr. Buffet and Mr. Munger have been leading the company for over five decades, transforming it into a wildly successful global conglomerate.
Berkshire Hathaway Subsidiaries
While Berkshire insurance successfully provides its clients insurance and reinsurance of property and casualty risks in the US. They also have several subsidiaries with life, accident, and health reinsurers, along with internationally based property and casualty reinsurers.
Berkshire Hathaway has over 50 subsidiaries as of 2018. They are major shareholders in many public and private companies.
Berkshire Hathaway Companies
Berkshire Hathaway is the proprietor of several companies, including Berkshire Hathaway HomeServices of America, Berkshire Hathaway Direct Insurance Company, Berkshire Hathaway Automotive, and the Berkshire Hathaway Energy Company.
They also own other companies like BNSF Railway, Duracell, MedPro Group, Geico, Clayton Homes, Benjamin Moore & Co., HomeServices of America, Lubrizol Corporation, Visa, Inc., JP Morgan Chase & Co., Suncor Energy Inc., and Acme Brick Company.
Apart from these organizations, Berkshire Hathaway also has major holdings in other well-known companies.
Berkshire Hathaway Holdings
The various companies that Berkshire Hathaway has holdings in include Apple, Bank of America, Wells Fargo, Coca-Cola, Goldman Sachs, Delta Airlines, and American Express.
The others are General Motors, Verizon Communications Inc., Johnson and Johnson, and Proctor and Gamble Co.
Berkshire Hathaway has also acquired companies. A few of these are General Reinsurance Corporation, GEICO, and NRG (Nederlandse Reassurantie Groep).
They also created Berkshire Hathaway Assurance, a bond insurance company, to help insure municipal and state bonds. BH also owns 89.8% of Berkshire Hathaway Energy. The subsidiary of Berkshire Hathaway Energy is UK’s Northern Powergrid.
Berkshire Hathaway Stock
Berkshire Hathaway (BRK.A) has the most expensive stock in the market and can set you back $ 415,991.99 today. The company also has another set of shares (BRK.B) that cost about $275.83, making them more affordable than its counterpart.
Both the shares are traded on the New York Stock Exchange. Despite taking a hit in 2019, it has performed well since. Buffet has been part of the company since the share was worth $19 in 1964, till now when the share price is over $400,000.
The company’s Class B stock share has surpassed the S&P 500 for years. As of 2018, the largest institutional shareholder of Berkshire Hathaway’s Class A stock is FERI Wealth Management.
The company has been running successfully since the 1960s due to its operation by “value” investor Warren Buffett. It has a market capitalization of over $600 billion. As a result, it is one of the largest publicly traded companies globally.
Summing Up
Berkshire Hathaway is an insurance company that owns many companies, like Fruit of the Loom, Acme Brick, Justin Boots, and Benjamin Moore paints, founded in the 1800s. They also own 6 and 10 percent of the Coca-Cola Company and more than 5 percent of Apple.
Warren Buffet has been investing in stocks since he was 11. Therefore, by 1962, he bought shares of this company as he was impressed by them and believed they were undervalued. His eventual increase of shares made him a “value” investor who runs the company.
Berkshire Hathaway now has a stake in numerous public and private companies. Buffet also has other self-named companies and has branched outside of insurance. They also manage to deliver a variety of commodities and services to the market.
They’ve expanded to include their services like producing computers and electronic products, providing insurance, producing clothing, serving food products, and automotive products and services.
Despite having a humble start in textiles, BH has become a conglomerate that invests in diverse companies to follow value investing strategies. According to the Wall Street Journal, 9 of Berkshire Hathaway’s companies had the chance of being listed as a Fortune 500.