Berkshire Hathaway ( and )
is a conglomerate holding company headquartered in Omaha, Nebraska, U.S., that
oversees and manages a number of subsidiary companies.
The Company averaged
an annual growth in book value of 20.3% to its shareholders for the
last 44 years, while employing large amounts of capital, and
is the company's
chairman and CEO. Buffett has used the "float" provided by
Berkshire Hathaway's insurance operations (a policyholder's money
which it holds temporarily until claims are paid out) to finance
his investments. In the early part of his career at Berkshire, he
focused on long-term investments in publicly quoted stocks, but
more recently he has turned to buying whole companies. Berkshire
now owns a diverse range of businesses including candy production,
retail, home furnishings, encyclopedias, vacuum cleaners, jewelry
sales; newspaper publishing; manufacture and distribution of
uniforms; manufacture, import and distribution of footwear; as well
as several regional electric and gas utilities.
Hathaway traces its roots to a textile manufacturing company
established by Oliver Chace in 1839 as
the Valley Falls Company in Valley Falls,
Hathaway Mills, New Bedford,
Chace had previously worked for Samuel Slater
, the founder of the first
successful textile mill in America. Chace founded his first textile
mill in 1806. In 1929 the Valley Falls Company merged with
the Berkshire Cotton Manufacturing Company established in 1889, in
The combined company was known as Berkshire Fine Spinning
In 1955 Berkshire
Fine Spinning Associates
merged with the Hathaway Manufacturing Company
founded in 1888 in New Bedford, Massachusetts by Horatio Hathaway.
was successful in its first
decades, but it suffered during a general decline in the textile industry
after World War I
. At this time, Hathaway
was run by Seabury Stanton, whose
investment efforts were rewarded with renewed profitability after
. After the merger
Berkshire Hathaway had 15 plants employing over 12,000 workers with
over $120 million in revenue and was
headquartered in New Bedford, Massachusetts.
However, seven of those locations were
closed by the end of the decade, accompanied by large
In 1962, Warren Buffett
stock in Berkshire Hathaway. After some clashes with the Stanton
family, he bought up enough shares to change the management and
soon controlled the company.
Buffett initially maintained Berkshire's core business of textiles,
but by 1967, he was expanding into the insurance industry and other
investments. Berkshire first ventured into the insurance business
with the purchase of National
. In the late 1970s, Berkshire acquired an
in the Government
Employees Insurance Company (GEICO
forms the core of its insurance operations today (and is a major
source of capital for Berkshire Hathaway's other investments). In
1985, the last textile operations (Hathaway's historic core) were
Berkshire's class A shares sold for $96,600 ,
making them the highest-priced shares on the New York Stock
Exchange, in part because they have never had a stock split and never paid a dividend, retaining
corporate earnings on its
balance sheet in a manner that is impermissible for private
investors and mutual funds
closed over $100,000 for the first time on October 23, 2006 and
closed at an all-time high of $150,000 on December 13, 2007.
Despite its size, Berkshire is not included in broad stock market
indices such as the S&P 500
Berkshire's CEO, Warren Buffett, is respected for his investment
prowess and his deep understanding of a wide spectrum of
businesses. His annual chairman letters are read and quoted widely.
Berkshire the most respected company in the world in 2007 based on
a survey of American money managers.
, Buffett owned 38% of Berkshire Hathaway. Berkshire's vice-chairman, Charlie Munger, also holds a stake big enough to make him a billionaire, and early investments in Berkshire by David Gottesman and Franklin Otis Booth resulted in their becoming billionaires as well. Bill Gates' Cascade Investments LLC is the second largest shareholder of Berkshire and owns more than 5% of class B shares.
Berkshire Hathaway is notable in that it has never split
its shares, which not only contributed to
their high per-share price but also significantly reduced the
of the stock. This refusal to
split the stock reflects the management's desire to attract
long-term investors as opposed to short-term speculators
. However, Berkshire Hathaway has
created a Class B stock, with a per-share value kept (by specific
management rules) close to of that of the original shares (now
Class A) and of the per-share voting rights. Holders of class A
stock are allowed to convert their stock to Class B, though not
vice versa. Buffett was reluctant to create the class B shares, but
did so to thwart the creation of unit trusts
that would have marketed
themselves as Berkshire look-alikes. As Buffett said in his 1995
shareholder letter: "The unit trusts that have recently surfaced
fly in the face of these goals. They would be sold by brokers
working for big commissions, would impose other burdensome costs on
their shareholders, and would be marketed en masse to
unsophisticated buyers, apt to be seduced by our past record and
beguiled by the publicity Berkshire and I have received in recent
years. The sure outcome: a multitude of investors destined to be
Berkshire's annual shareholders' meetings,
taking place in the Qwest Center in Omaha, Nebraska, are routinely visited by 20,000
The 2007 meeting had an attendance of approximately
27,000. The meetings, nicknamed "Woodstock for Capitalists", are
considered Omaha's largest annual event along with the baseball
College World Series.
Known for their humor and light-heartedness, the meetings typically
start with a movie made for Berkshire shareholders. The 2004 movie
featured Arnold Schwarzenegger
in the role of "The Warrenator" who travels through time to stop
Buffett and Munger's attempt to save the world from a "mega"
corporation formed by Microsoft-Starbucks-Wal-Mart.
Schwarzenegger is later shown arguing in a gym with Buffett
. The 2006 movie depicted actresses Jamie Lee Curtis
and Nicollette Sheridan
Munger. The meeting, scheduled to last six hours, is an opportunity
for investors to ask Buffett questions.
The salary for the CEO is US$100,000 per year with no stock
options, which is among the lowest salaries for CEOs of large
companies in the United States.
The current members of the board of
of Berkshire Hathaway are: Warren Buffett
, Charlie Munger
, Walter Scott, Jr.
, Thomas S. Murphy
, Howard Graham Buffett
, Ronald Olson
, Charlotte Guyman
, Bill Gates
Insurance and reinsurance business activities are conducted through
more than 50 domestic and foreign-based insurance companies.
Berkshire’s insurance businesses provide insurance and reinsurance
of property and casualty risks primarily in the United States. In
addition, as a result of the General Re
acquisition in December 1998, Berkshire’s insurance businesses also
included life, accident and health reinsurers, as well as
internationally-based property and casualty reinsurers. Berkshire’s
insurance companies maintain capital strength at exceptionally high
levels. This strength differentiates Berkshire’s insurance
companies from their competitors. Collectively, the aggregate
statutory surplus of Berkshire’s U.S. based insurers was
approximately $48 billion at December 31, 2004. All of Berkshire’s
major insurance subsidiaries are rated AAA
by Standard & Poor’s
Corporation, the highest Financial Strength Rating assigned by
Standard & Poor’s, and are rated A++ (superior) by A. M. Best
with respect to their financial condition
and operating performance.
- GEICO — Berkshire acquired GEICO in
January 1996. GEICO is headquartered in Chevy Chase,
Maryland and its principal insurance subsidiaries include:
Government Employees Insurance Company, GEICO General Insurance
Company, GEICO Indemnity Company, and GEICO Casualty
Company. Over the past five years, these companies have
offered primarily private passenger automobile insurance to
individuals in all 50 states and the District of Columbia. The
subsidiaries market their policies primarily through direct
response methods, in which applications for insurance are submitted
directly to the companies by telephone, through the mail, or via
- General Re — Berkshire acquired
General Re in December 1998. General Re held a 91% ownership
interest in Cologne Re as of December 31, 2004. General Re
subsidiaries currently conduct global reinsurance business in
approximately 72 cities and provide reinsurance coverage worldwide.
General Re operates the following reinsurance businesses: North
American property/casualty, international property/casualty, which
principally consists of Cologne Re and the Faraday operations, and
life/health reinsurance. General Re’s reinsurance operations are
primarily based in Stamford, Connecticut and Cologne, Germany.
General Re is one of the largest reinsurers in the world based on
net premiums written and capital.
- NRG (Nederlandse Reassurantie Groep) — Berkshire acquired NRG,
a Dutch life reinsurance company, from ING
Group in December 2007.
- Berkshire Hathaway
Assurance — Berkshire created a government bond insurance company to insure municipal
and state bonds. These type bonds are issued by local governments
to finance public works projects such as schools, hospitals, roads,
and sewer systems. Few companies are capable of competing in this
Utilities and Energy Group
Berkshire currently holds 83.7% (80.5% on a fully-diluted basis) of
Energy Holdings Company
. At the time of purchase, Berkshire's
voting interest was limited to 10% of the company's shares, but
this restriction ended when the Public Utility
Holding Company Act of 1935
was repealed in 2005. A major
subsidiary of MidAmerican is CE Electric
Manufacturing, Service, and Retailing
Berkshire’s apparel businesses include manufacturers and
distributors of a variety of clothing and footwear. Businesses
engaged in the manufacture and distribution of clothing include
Underwear Corp. - Fruit of the
, Fechheimer Brothers
and Russell Corporation
footwear businesses include H.H. Brown Shoe Group
, Acme Boots
. Berkshire acquired Fruit
of the Loom
on April 29, 2002 for $835 million in cash.
the Loom, headquartered in Bowling Green, Kentucky, is a vertically integrated manufacturer of basic
Berkshire acquired Russell Corporation
on August 2, 2006
for $600 million or $18.00 per share.
In August 2000, Berkshire entered the building products business
with the acquisition of Acme Building
. Acme, headquartered in Fort Worth,
Texas, manufactures and distributes clay bricks (Acme
Brick), concrete block (Featherlite) and cut limestone (Texas
Berkshire acquired Benjamin Moore & Co.
December 2000. Benjamin Moore, headquartered in Montvale,
New Jersey, is a formulator, manufacturer and retailer of
primarily architectural coatings, available principally in the
States and Canada.
Berkshire acquired Johns Manville
February 2001. JM has been serving the building products industry
since 1885 and is a manufacturer of fiber glass wool insulation
products for walls, attics and floors in homes and commercial
buildings, as well as pipe, duct and equipment insulation products.
Berkshire acquired a 90% equity interest in MiTek
Inc. in July 2001. MiTek is
headquartered in Chesterfield, Missouri and makes engineered connector products,
engineering software and services, and manufacturing machinery for
the truss fabrication segment of the building components
Berkshire acquired Shaw
, Inc. in 2001. Shaw, headquartered in Dalton,
Georgia, is the world’s largest carpet manufacturer based
on both revenue and volume of production.
Shaw designs and
manufactures over 3,000 styles of tufted and woven carpet and
laminate flooring for residential and commercial use under about 30
brand and trade names and under certain private labels. On August
7, 2003, Berkshire acquired Clayton
, Inc. Clayton, headquartered near Knoxville,
Tennessee, is a vertically integrated manufactured housing
At year-end 2004, Clayton operated 32 manufacturing
plants in 12 states. Clayton’s homes are marketed in 48 states
through a network of 1,540 retailers, 391 of which are
company-owned sales centers.
In 1996, Berkshire acquired FlightSafety International
corporate headquarters is located at LaGuardia Airport in Flushing, New
FSI engages primarily in the business of providing
high technology training to operators of aircraft and ships.
FlightSafety is the world's leading provider of professional
aviation training services. Berkshire acquired NetJets
Inc. in 1998. NJ is the world’s leading
provider of fractional ownership programs for general aviation
aircraft. In 1986, NJ created the fractional ownership of aircraft
concept and introduced its NetJets program in the United States
with one aircraft type. In 2004, the NetJets program operated 15
aircraft types. In late 1996, NJ expanded its fractional ownership
programs to Europe via a joint venture arrangement which is now
100% owned by NJ. The fractional ownership of aircraft concept
permits customers to acquire a specific percentage of a certain
aircraft type and allows them to utilize the aircraft for a
specified number of flight hours per annum.
The home furnishings businesses are the Nebraska Furniture Mart,
R.C. Willey Home Furnishings, Star Furniture Company, and Jordan’s
Furniture, Inc. CORT
Business Services Corporation
was acquired in 2000 by an 80.1%
owned subsidiary of Berkshire and is the leading national provider
of rental furniture, accessories and related services in the
“rent-to-rent” segment of the furniture rental industry.
In 2002 Berkshire acquired The
, LTD, the largest direct seller of kitchen tools
in the United States. Products are researched, designed and tested
by TPC, and manufactured by third party suppliers. From its
Addison, Illinois headquarters, TPC utilizes a network of more than
65,000 independent sales representatives to sell its products
through home-based party demonstrations, principally in the United
chocolates and other confectionery products in two large kitchens
in California. See’s revenues are highly seasonal with
approximately 50% of total annual revenues being earned in the
months of November and December. Dairy
services a system of approximately 6,000 stores operating
under the names Dairy Queen, Orange Julius and Karmelkorn that
offer various dairy desserts, beverages, prepared foods, blended
fruit drinks, popcorn and other snack foods.
Marmon Holdings Inc
on December 25,
2007. Privately held conglomerate owned by the Pritzker family for
over fifty years. Owns and operates an assortment of manufacturing
companies that produce railroad tank cars,shopping carts, plumbing
pipes, metal fasteners, and wiring and water treatment products
used in residential construction.
acquired McLane Company, Inc. in May
2003 from Wal-Mart Stores, Inc.
McLane provides wholesale
distribution and logistics services in all 50 states and
internationally in Brazil to customers that include discount
retailers, convenience stores, quick service restaurants, drug
stores and movie theatre complexes. Scott
Companies — The Scott Fetzer Companies are a diversified
group of 21 businesses that manufacture and distribute a wide
variety of products for residential, industrial and institutional
use. The three most significant of these businesses are Kirby home cleaning systems
, Wayne Water
Systems and Campbell Hausfeld products. Scott Fetzer also
manufactures Ginsu Knives. The
publishes one edition daily from its
headquarters in Buffalo, New York.
In 2002, Berkshire acquired Albecca Inc. Albecca is headquartered
in Norcross, Georgia, and primarily does business under the
Larson-Juhl name. Albecca designs, manufactures and distributes
custom framing products, including wood and metal molding,
matboard, foamboard, glass, equipment and other framing supplies.
Berkshire acquired CTB International Corp. in 2002. CTB,
headquartered in Milford, Indiana, is a designer, manufacturer and
marketer of systems used in the grain industry and in the
production of poultry, hogs, and eggs. Products are produced in the
United States and Europe and are sold primarily through a global
network of independent dealers and distributors, with peak sales
occurring in the second and third quarters.
Finance and Financial Products
Berkshire acquired XTRA
in September 2001.
XTRA, headquartered in St. Louis, Missouri, is a leading
transportation equipment lessor. XTRA manages a diverse fleet of
approximately 105,000 units, constituting a net investment of
approximately $1 billion as of December 31, 2004. The fleet
includes over-the-road and storage trailers, chassis, intermodal
piggyback trailers and domestic containers.
Clayton's finance business, (loans to manufactured home owners),
earned $206 million down from $526 million in 2007. Loan losses
remain 3.6% up from 2.9%.
Equities - Beneficial ownership
This includes some of the companies where a Berkshire Hathaway
stake is 5% or more of the outstanding stock, as reported in the
last proxy statement SEC filing
, and the latest annual report
. In order of percentage stake:
Berkshire owns $27 billion in fixed income securities, mainly
foreign government bonds and corporate bonds.
Recently, Berkshire has purchased preferred stock
, Goldman Sachs
, and GE
totaling $14.5 billion.
On November 3, 2009 Berkshire Hathaway announced that it was
acquiring the remainder of BNSF Railway
that it does not already own for stock and cash for $26 billion.
This is the largest acquisition in Berkshire's history.
- Providence Journal Article July 10, 2006
- Associated Press. Warren Buffett's Berkshire Hathaway named most
respected company. September 16, 2007.
- Taipei Times
- "Warren Buffett: Value Man Through And Through",
- Buffett on Berkshire, compensation and successors -
May. 5, 2007
- Berkshire Hathaway to buy reinsurer, start bond
insurer - MarketWatch
- Management Discussion, Berkshire Hathaway
2008 Annual Report, p.71
- Chairman's Letter, Berkshire Hathaway 2008
Annual Report, p.18
- Buffett Bets Big on Railroads’ Future