Berkshire Hathaway, Inc is an American business conglomerate and multinational holding company which calls Omaha, Nebraska home, being headquartered there. Berkshire is known for its leadership and control by Warren Buffet, who serves as chief executive officer (CEO) and chairman and who has turned the company into one of the best investment stories in modern financial history.
There has been a lot written about this company, a product of Buffet's guiding hands for over a half century who turned a little textile maker into one of the biggest collection of companies and stocks known to conglomerates. Even if you're a shareholder, you probably don't know everything there is to know about the company. Here's 20 fun facts you didn't know about Berkshire Hathaway. For this purpose, from here on out, Berkshire Hathaway will be referred to as BH.
1. Starter Fact
Just to get things started, Buffet, the company's famous CEO, first purchased stock when he was only eleven years old, back in 1941, learning one of his very first lessons about being patient, especially when it comes to watching stocks. He bought six shares of a company for both himself and his sister, the stock falling as soon as he purchased it. However, the stock then rose slightly immediately after. Eventually, he sold their shares for two hundred dollars each, making a huge profit on the original forty dollars with which he bought each with.
2. The Real Reason
Buffet bought BH in 1964 simply so he could fire its existing CEO. Buffet and the company, which was then just a clothing mill in Omaha, agreed upon a purchasing price for which the company would buy back Buffet's shares. Nonetheless, when the offer become official, the company was offering a much lower price than previously discussed. Instead of selling, Buffet, who was angered, bought up the controlling share of stock and fired the CEO who refused to honor their original deal. Leadership is now shared between Buffet, the vice-chairman Charlie Munger, and Ted Weschler and Todd Combs, who are both investment managers who provide help with investment decision-making and other financial expertise.
3. A Bad Investment
Buffet actually considers BH to be one of his worst investments. In fact, he often considers the worst mistake he ever made! Because of BH not honoring their deal to buy Buffet's shares and his subsequent purchase of the controlling interest, he says that it knocked him out of his original plan to begin purchasing insurance companies, which he did eventually. However, he says had he bought into insurance when he first wanted to, he would have made himself and other investors over two hundred billion dollars in his estimates. Initially, it cost BH eight point five million dollars to step into the world of insurance, but it has most definitely paid off in the end. Insurance is currently on of BH's major enterprises. Buffet said BH had carried an anchor (the textile assets) that weren't any good and that he fought the textile business for twenty years before giving up completely. If he'd put the money he originally invested in the textile industry into insurance instead, he says BH would be worth twice as much now than it is.
4. Large Cash Stockpile
Believe it or not, BH has a cash balance of about eighty-six billion dollars. Unlike most companies, BH even keeps the lion's share of this cash in the US and ready to use. Buffet prefers keeping at least twenty billion on hand for emergencies, his first priority making sure the company has the capital it needs to conduct business. Buffet and company searches for investments and acquisitions and if nothing looks good, he'll consider buying back BH stock, but only if he considers it be substantially intrinsic. If all else fails, they leave the cash hoard alone, letting it continue to grow while watching for other opportunities. This system of business is why BH has such a large cash stockpile in the first place. To put this into more perspective, BH has enough cash on hand to purchase the likes of PayPal in cash!
5. Two Classes of Stock
BH actually has two different classes of stock. As the price of shares grew in value, Buffet knew that investment companies would start selling off fractional bits to smaller investors while attaching huge fees to the original stock price. In order to prevent this from happening, Buffet decided to split the stock, creating a second class of shares referred to as Class B or baby Bs. The original Class A shares trade for almost a quarter million dollars each, making them out of reach for most investors. However, the Class B shares trade for only about a hundred and sixty-four dollars, providing an investment source for most who want to invest in BH. BH has the most expensive stock in US investing history.
6. In the Beginning
BH was originally a failing textile manufacturer when Buffet first took control. He didn't decide to augment the company, buying into the insurance industry, until a few years later, in 1967, when BH acquired National Indemnity Company. Buffet ultimately succeeded in turning the failing company into one of the largest multinational conglomerates in the word. In fact, BH is now the sixth-largest company in terms of market capitalization, falling between Facebook and Exxon Mobile in terms of ranking. However, the textile operations ceased in 1985 because of inability to compete with the competition. Eventually the mills were liquidated due to BH not being able to find a buyer.
7. BH History
BH, in its original form, is completely different from the BH of today. Actually, BH's history can be followed back to the original textile manufacturer which was first established way back in 1839. Back then it was called Valley Falls Company. It eventually merged in 1929 with the source of the first part of its namesake, the Berkshire Cotton Manufacturing Company. Additionally, the BH name was eventually created in 1955, when Berkshire Drummer Mills merged with Hathaway Manufacturing. Immediately after the merger, however, the company initially began to lose money.
8. Diverse Holdings
Buffet and company mostly focus on long-term investments. However, more frequently they have bought entire companies. Because of this, BH now owns a diverse range of businesses. Some of these include retail, confectionery, home furnishings, railroads, vacuum cleaner manufacturers, encyclopedias, newspaper publishing, jewelry sales, uniform manufacturer and distributor, and even some regional gas and electric utility companies.
9. Household Names
Although BH isn't widely known, many of its holdings are household names. In fact, BH has a stock portfolio containing some forty-five different companies. The majority of the companies stock is in the following companies: Pilot Flying J, American Express, IBM, Coca-Cola, Kraft Heinz, Wells Fargo, and Apple, which is one of their latest acquirements. The company bought additional Apple stock in 2017. Additionally, BH owns Fruit of the Loom, Dairy Queen, GEICO, BNSF Railway, NetJets, Pampered Chef, FlightSafety International, Long & Foster, Helzberg Diamonds, and Lubrizol. There's no doubt that BH is one of the most diverse holding companies in the world.
10. Dividend Collections
Shareholders have only collected one dividend since 1965. A dividend, for explanatory reasons, is a regularly sum of money paid out by a company, generally quarterly. The dividend in question was in 1967 and the shareholders received ten cents a share. Buffet likes to joke about this, saying he must have been in the bathroom at the time of its occurrence. BH, employing large amounts of capital while retaining minimal debt, averages a growth of nineteen percent annually to its shareholders, which is generously more than the average of nine point seven as reported by the Standard & Poor's 500 (S&P 500). The S&P 500 is an index for the American stock market which is based on 500 large companies and their market capitalization having common stock.
11. Many Assets
BH's assets, as mentioned before, cover a wide variety of assets, which include items, vehicles, buildings, and real estate. The company has more assets than Amazon. In fact, if you added up all of BH's assets, they would combine to be worth about ten times more than Amazon. Now that's a lot of assets!
Until only recently, BH had been distantly outperforming the S&P 500 for years. In fact, in the time since Buffet took over the company, it has only under-performed the S&P once for five years from 2008 to 2013. Over the past ten years or so, BH's performance hasn't met its previously set high standards from the 1980s and 1990s. This shrinking gap of performance is not a sign that Buffet, or his company, is losing his touch. In fact, it would be impossible for the company to continue to grow as it had. If the company were to grow as it had the past fifty years for the next additional fifty years, the company would be worth almost eight quadrillion dollars! (I didn't even know that was an amount!) This amount, however, is so absurd, it is thirty times the value of everyone's wealth on earth. It's just not possible to make that much money.
13. Employee City
BH has enough total employees that they could populate a small city by themselves. In fact, BH employs over three hundred and thirty thousand people, with only twenty-three of those in its headquarters. That's not actually a very small city were they to populate one area. Once you add in all their families, BH could most definitely populate its own city of a million residents or more.
14. Official BH Shareholders Drink
No, it's not an alcoholic drink. Instead, it's cherry coke, which just so happens to be Buffet's favorite drink. Nonetheless, the BH Annual Shareholders Meeting has named cherry coke as its official drink in honor of their beloved CEO and chairman.
15. Wind Power
BH is a very big supporter of wind power. In fact, BH's MidAmerican Energy was the number one owner of wind-generated power among US entities which are rate-regulated.
16. Headquarters' Staff Role
Buffet and the rest of the BH staff at headquarters essentially don't play a role in regular operations of its subsidiaries. Buffet believe's that when investing in business operations, there should be confidence in those running the business. When he's looking to buy stock, having devoted and talented leadership is just part of what he looks for when there's a potential to buy just stock or the whole company.
17. BH Income
BH makes a lot of money from a lot of different things. Their stock gets a lot of attention from the press, however, it's the income which is generated by their acquisitions that make the company worth so much. Here's just some of the income generated by BH and its subsidiaries:
- Finance and Financial Products, almost one billion dollars
- Manufacturing and Retail, over four million dollars
- BNSF Railways, almost four million dollars
- Utilities, almost a billion and a half.
- Insurance, three billion.
- Dividends from stock holdings, almost one and a half billion.
While the value of BH's stock portfolio is significant, the income is generated by it's operating businesses that generate the income.
18. Top Five Holdings
Obviously we've talked a lot about BH's various holdings, vast as they may be. The top five holdings of BH are the following: Walmart, Proctor & Gamble, American Express, Coca-Cola, and Wells Fargo. Furthermore, each of these five top holdings have an excellent cost to market value ratio, making them even more valuable to BH.
19. Portfolio Managers
Buffet isn't the only who decides how to invest BH's money. Ted Weschler and Tod Combs are co-investment managers who each manage large portfolios in the amount of seven billion dollars. As a matter of fact, according to Buffet, the two investment managers have managed to generate higher returns than his own investments did over the same time period. Of course, it's only a time frame of a few years, but they've both outperformed the S&P 500. Having these two fairly young and very talented minds working on investing BH's money gives the company a great outlook for the future.
20. When Buffet Steps Down
Speaking of the future, when Buffet steps down is still a mystery; when it will happen is anybody's guess. The stock will probably plummet initially when he leaves, but Buffet has been guiding the company toward this end for sometime, knowing that eventually he will have to give it up. Buffet has made sure that the company will remain just as solid as it has during his handling of it. The fact that the company is well-structured, with autonomous business operations which all have talented and devoted leaders is a strong indication that Buffet's departure won't lead to the eventual downfall of the conglomerate. BH is a great company with diversified investments that will most likely to continue being so, despite who sits at the helm. Because Buffet has done his job well over the years means that others will be able to benefit from BH as well. He said it best when he said that because someone planted a tree long ago, someone else gets to sit under its shade.
In closing, one more thing needs to be said of Buffet. He has given away more than a fourth of his shares to charity. Furthermore, he gives away four percent of the holdings he still retains each year. In fact, he made a Giving Pledge will Bill Gates, promising to give away ninety-nine percent of his wealth to charity instead of passing down to his children. Buffet's BH wealth will be distributed by his estate within ten years to current charitable needs.
His children carry on his philanthropic legend already, each of his three children run charity organizations of their own. In fact, its their efforts in philanthropy that makes him the proudest. He said it was the most satisfying thing to watch his children pick their interests and work more hours than most do at jobs in order to give money away intelligently in fields they specifically care about. It seems Buffet's legacy will live on in not only his children, but also in his company, BH.
Written by Garrett Parker
Read more posts by Garrett Parker