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You may have heard of Berkshire Hathaway in passing but do not know what this multinational holding company is really all about.
This conglomerate is owned and led by the famous investors Warren Buffett and Charlie Munger.
Let’s delve into the nuances of Berkshire Hathaway to give investors a clear idea of what this holding company does and why it is such a hot topic in the mainstream investing media.
What is Berkshire Hathaway?
Berkshire Hathaway is a publicly traded holding company headquartered in Omaha, Nebraska. Warren Buffett owns and manages the company with his friend Charlie Munger. They are 93 and 97 years old, respectively.
Berkshire Hathaway has two classes of stock, BRK.A and BRK.B. The A shares trade around $419,000 per share, and the B are approximately $275 per share.
However, Berkshire Hathaway has not always been a holding company. The business first launched as a textile manufacturer.
Today, Berkshire Hathaway controls interests or ownership of dozens of the world’s top companies, like GEICO, Coca-Cola, American Express, and Apple (AAPL).
This diversified holding company has ownership stakes in other businesses and also has subsidiaries within the home services and insurance segments.
Berkshire Hathaway’s market cap is in excess of $643 billion, and is one of the largest companies in the world.
Brief History of Berkshire Hathaway
As noted above, Berkshire Hathaway initially launched as a textile company. The business now has ownership stakes in companies across several industries.
The company’s story dates back to the merger of Berkshire Cotton Manufacturing Company with Hathaway Manufacturing Company.
Warren Buffett’s investing group took over Berkshire Hathaway in 1965. His value investing strategy led Berkshire to acquire undervalued companies, an approach that eventually created one of the world’s most valuable businesses in the world.
Berkshire Hathaway’s initial holdings were predominantly insurance businesses. Fast forward to ’85, and Buffet had liquidated Berkshire Hathaway’s textile business, choosing to focus on building the world’s top holding company.
What Are Berkshire Hathaway’s Top 10 Largest Holdings?
The company’s top holdings are Apple, Bank of America, American Express, Coca-Cola, Kraft Heinz, Verizon Communications, U.S. Bancorp, Moody’s, BYD, and DaVita.
Berkshire Hathaway’s position in Apple is in excess of $115 billion. The company’s stake in Bank of America is valued at a whopping $43 billion.
What Companies Does Berkshire Hathaway Own?
Berkshire Hathaway fully or partially owns a plethora of companies. The conglomerate has stakes in businesses in sectors ranging from apparel to food, fintech, transportation, insurance, and beyond. Berkshire Hathaway fully owns more than 50 subsidiaries.
The company fully owns or has a controlling interest in the insurance giant Geico, the restaurant chain Dairy Queen and the apparel powerhouse Fruit of the Loom.
Berkshire Hathaway’s largest and most significant holdings are in the insurance industry. The conglomerate owns Geico along with several other insurance businesses.
Geico provides all sorts of insurance, including auto, boat, and home insurance.
Additional Berkshire Hathaway holdings include the battery maker Duracell, the investment services provider Goldman Sachs and payment processing specialist American Express.
What Exactly Does Berkshire Hathaway Do?
Berkshire Hathaway primarily invests in or acquires other businesses.
Berkshire Hathaway has more than half a dozen self-titled businesses that operate under the Berkshire Hathaway name, with a qualifier added for identification purposes.
The company’s businesses and holdings bring all sorts of services and commodities to consumers and other companies.
Examples of Berkshire Hathaway companies’ items brought to market include computers, insurance, food products, clothing, and automotive services and products.
Why is Berkshire Hathaway Stock so Expensive?
Berkshire Hathaway currently trades around $419,000 per share. It is the highest dollar amount for a single share of a company in the public markets.
Berkshire has not split its class A version of stock but created Class B shares so the average investor could participate.
Buffett believes keeping Class A shares at their current price attracts ‘like-minded’ investors, which preserves the quality of the company and the way the stock is traded.
What Kind of Stock is Berkshire Hathaway?
Berkshire Hathaway is traded as either a Class A or Class B stock. Each class of stock provides investors with direct ownership of the conglomerate, yet the Class B variety is significantly less per share, presenting a more reasonable opportunity for retail investors to scoop up shares.
Who Are the Founders of Berkshire Hathaway?
Contrary to popular opinion, the original company was not founded by Warren Buffett. Rather, Oliver Chace started the business under the moniker of “Valley Falls Company” way back in 1929. This business was later combined with Berkshire Cotton Manufacturing Company.
Bottom Line: What Is Berkshire Hathaway?
Berkshire Hathaway is a value investing opportunity with legitimate merit. Invest in this behemoth, and you will own some of the world’s top businesses with effective moats.
We expect Berkshire Hathaway to remain a good investment even after its first leadership change in 60 years.
This article is for informational purposes only. It is not intended to be investment advice.