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Berkshire Hathaway Analysis

878 words - 4 pages

Berkshire Hathaway

Summary Facts about the Firm

Berkshire Hathaway is an American multinational company based out of Omaha, Nebraska, USA & does not resemble the original company that Buffett had bought during the 1960’s. As of 2008, it was active in a variety of sectors, including insurance, regulated utilities & retailing. It is a holding company that manages a number of subsidiary companies belonging to the companies in these variety sectors. In 2008, the revenues of the conglomerate had become $81.7 bn. Warren Buffett has been at the helm of affairs since the inception & still remains the current Chairman and CEO. Charlie Munger, who is his best advisor and has been ...view middle of the document...

The main business of Berkshire is insurance and is the dominant driver of the company value.

Utilities & Energy

Berkshire owns 90% of MidAmerican Energy Holdings Company. MidAmerican has several operating
units as follows:

(1) PacifiCorp
(2) MidAmerican Energy Company
(3) Northern Natural Gas Company
(4) Kern River Gas Transmission Company
(5) CE Electric
(6) CalEnergy
(7) HomeServices of America.
Burlington Northern Santa Fe railroad acquired in 2010 is also part of this group.

Manufacturing, Service & Retail

This segment consists of very diverse group of businesses the most significant of which are

(1) 64% ownership of Marmon
(2) Shaw Industries
(3) McLane
(4) 80% ownership of ISCAR Metalworking Companies
(5) FlightSafety International
(6) NetJets.

Finance & Finance Products

This consists of four main units

(1) Clayton Homes
(2) XTRA Corporation
(3) BH Finance
(4) CORT.

The latest snapshot of the allocation of businesses is as follows:

Investment Strategies

The latest equity allocation portfolio looks as following:

Investment Strategy – Major Points

* Try and find out stocks whose prices were below their fair value
* Five rules of investing that Buffett followed in this strategy
* Pay no attention to the market or macroeconomic trends in evaluating a business. Focus on the long-term business with the belief that the market would in the long term efficiently reflect the real value
* Invest only in sectors and companies it understood well
* Managers should have substantial stakes in their companies or they should be persisted to get stakes in their companies
* Use financial statements to evaluate a company. Paid little credence to equity research
* Do not focus on too many stocks. Focus on few stocks and bet big on...

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