What is Berkshire Hathaway?

Berkshire Hathaway is an American holding company for a number of businesses. The company is run by famous investor Warren Buffett. The headquarters are in Omaha, Nebraska.

Berkshire Hathaway has a market capitalisation of over $600 billion, making it one of the largest publicly traded companies worldwide. It has two classes of stocks, and its class A shares are the most expensive stock on the stock market.

As well as its expensive shares, Berkshire Hathaway is one of the top-performing companies in the market, and fully owns or owns controlling interests in many major companies, including Geico, Fruit of the Loom and Dairy Queen.

The History of Berkshire Hathaway

The company was originally a textile manufacturer and was founded through the merger of Hathaway Manufacturing Company and Berkshire Cotton Manufacturing Company in 1955.

The company was later taken over by Buffett’s investment group in 1965, and quickly became well known through Warren Buffett’s strategy of value investing – by buying up stock or companies that were undervalued. Buffett completely transformed a struggling textile manufacturing company into one of the biggest and most expensive conglomerates and stocks in the world.

In the beginning, Buffett kept Berkshire’s main business of textiles. By 1967, Warren was expanding into insurance and other investments. Berkshire first invested in the insurance business by buying National Indemnity Company. In the late 1970s, Berkshire purchased a share in the Government Employees Insurance Company, which forms the core of its insurance operations today. It is also a major source of capital for Berkshire Hathaway’s other investments. The last textile operations were shut down in 1985.

Since 1985, Berkshire Hathaway has maintained a diverse portfolio, buying interests or whole companies in food, clothing, transportation and even tech.

What companies does Berkshire Hathaway own?

Berkshire Hathaway owns or has a large stake in many big companies – including both public and private companies. As of 2018, Berkshire Hathaway fully owned about 50 subsidiaries.

• Berkshire Hathaway Companies

Berkshire Hathaway owns several companies including Berkshire Hathaway HomeServices of America, Berkshire Hathaway Direct Insurance Company, Berkshire Hathaway Automotive, Berkshire Hathaway Energy Company, and many more.

The holding company also owns many other companies, including BNSF Railway, Duracell, MedPro Group, Geico, Clayton Homes, Benjamin Moore & Co., HomeServices of America, Lubrizol Corporation, Acme Brick Company and many more.

Apart from the companies Berkshire Hathaway owns, the company holds large investments in several other companies – including some of the biggest public names on the market.

• Berkshire Hathaway Holdings

Berkshire Hathaway has significant investments in different companies – from tech to transportation and more. It also has a large investment portfolio of stocks in major public companies, such as Apple (AAPL), Bank of America (BAC), and United Parcel Service (UPS). Berkshire’s public market equity portfolio was valued at nearly $270 billion as of February 2021.

• Berkshire Hathaway Stock

Berkshire Hathaway is the market’s most expensive stock with Class A shares trading for $421,420 per share as of May 4, 2021.

How Warren Buffett Made Berkshire Hathaway Successful

Berkshire Hathaway is one of the most desired stocks and one of the biggest companies in the world. The company has made a name for itself due to the expertise of Warren Buffett who acquired the company in the mid-1960s.

Buffett turned Berkshire Hathaway into the world’s largest holding company by buying failing businesses and turning them around.

Berkshire Hathaway’s available reserve or float stays in the business to be invested in the way managers consider to be suitable. The company’s float, $138 billion in 2020, is one of the largest in the world. But it is also more than 3,000 times what it was in 1970. Therefore, Berkshire Hathaway can quickly buy struggling companies and transform them. For example, Berkshire purchased Fruit of the Loom (a clothing company) for $835 million in 2002 after its stock lost 97% of its value.

Berkshire Hathaway tends to invest in companies that have a long history of paying dividends. Many of the Fortune 500 companies in which Berkshire Hathaway holds large positions, Apple, Coca-Cola and American Express, have a steady history of maintaining or increasing dividends every year.

However, Warren does not apply the same rule to his company. Buffett invests in companies that pay dividends, but he avoids paying them out to his own investors. Buffett’s strategy is to reinvest dividends rather than paying out to investors. The stock price for Class A shares has skyrocketed since Buffett took control, trading at $275 in 1980, $32,500 in 1995, and $424,840 as of May 5, 2021. Class B shares have done quite well too. The share rose from $20.66 per share when first issued in 1996, to $79 in 2010, to $282 as of May 5, 2021.

Berkshire Hathaway’s logic is simple. Buffett prefers to reinvest the dividends instead of paying these out to investors. It makes a lot of sense. As an investor, would you rather have a dividend payment to spend, or would you prefer for that money to be invested in one of the largest and most financially robust companies to date?

Some investors look for value, then buy shares of companies that fit their criteria. Berkshire Hathaway takes a similar approach. But instead of buying a few shares of a company’s stock, it buys the whole company. After decades of applying that investment strategy, the result is a massive global conglomerate.

Is Berkshire Hathaway Stock a Buy Now?

Berkshire Hathaway stock has been lagging the S&P 500 index since late 2018 and has been outperforming in 2021. Berkshire stock has now formed a new base, but it has not yet reached its buy point. Investors who are interested in buying the stock should add it to their watchlist and wait to see if it can break past its new buy point.

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