Berkshire Hathaway

Berkshire Hathaway, despite its immense wealth and influence, is a names that few
average people have come across. The irony of the situation is further compounded by fact that
this multi-billion-dollar business owns more than fifty businesses that include common
household names and brands like GEICO, Duracell, Fruit of the Loom and Dairy Queen.
Berkshire Hathaway has it humble beginnings in the textile manufacturing industry
where it existed as The Valley Falls company in 1839 founded by Olive Chace. Valley falls
would later merge in 1889 with Berkshire Cotton manufacturing to form the Berkshire Fine
Spinning Associates in 1889. The last merger that would give it its final name, Berkshire
Hathaway happened in 1955 when Berkshire Fine Spinning Associates merged with the
Hathaway Manufacturing Company to from what is known today as Berkshire Hathaway.
After the merger, Berkshire Hathaway had under its care fifteen plants employing over
12,000 workers generating a revenue in excess of $120 million dollars with its headquartered
in New Bedford. However, soon after, seven of the fifteen plants were shut down before the end
of the decade, complemented by large layoffs of workers as the industry faced massive losses.
An Incorporated American corporation company situated Omaha, Nebraska in the United
States of America the company has since its humble beginnings diversified into a myriad of
industries to form a conglomerate of great repute. The company has diversified into the airline
industry having acquired significant holdings in some of the major US airlines, and is currently
the leading stakeholder in Delta Air Lines and United Airlines, as well as being in the top three
shareholders in American and Southwest Airlines. It wholly owns a number of subsidiaries that
include FlightSafety International, Dairy Queen, Lubrizol, Helzberg Diamonds, Long &
Foster, Fruit of the Loom, BNSF Railway and Pampered Chef among others.
Despite Berkshire Hathaway wholly owning close to 59 subsidiaries with interests in
everything from shoes to clothing to candy to furniture, range of businesses is expansive to say
the least. It includes, jewellery sales, home furnishings, confectionery, vacuum cleaner
manufacture, retail, railroads, encyclopaedias, publishing newspapers, uniform manufacture and
several regional electricity and gas utility companies.
Forbes Global 2000 list and formula has placed Berkshire Hathaway as the ninth largest
multinational by revenue and the third largest publicly listed company in the world. It also has
major shareholding in other companies such as Pilot Flying (38.6%), Kraft Heinz Company
(26.7%), as well as minority holdings in The Coca-Cola Company (9.4%), Apple (3.3%),
American Express (17.6%) and Wells Fargo (9.9%).
However, with all this diversification and interests and despite it beginnings in the textile
industry, more than everything else Berkshire Hathaway is predominantly an insurance provider.
Berkshire Hathaway has averaged 9.7% from the S&P 500 with dividends included
coupled with an annual growth in book value of 19.0% to its shareholders since 1965 whilst at
the same time expending hefty amounts of capital, despite the fact that they incur minimal debt.
(quote source)
Berkshire Hathaway is renowned for the leadership and control of its majority
shareholder and chairman and chief executive Warren Buffett. Because of its long history of
operating achievements and ardent stock market investments, the company has grown in leaps
and bounds to be one of the largest companies in the world in relation to market capitalization.
Currently Berkshire Hathaway is the seventh largest company in the S&P 500 Index by market
capitalization, and is renowned for having the record for the highest costing share price in history
with a Class A share valued around $300,000 each. It is due to this fact that on no occasion has
there been a stock split and Warren Buffett stated in a 1984 letter to shareholders that he does not
intend to do so in future.
Shifting our attention to the financial results we continue to see the good performance
that the company has been enjoying more so in the recent past. The first indicator that we will
look at is the profit margin. The profit margin simply looks at how much or the amount that
revenue from sales has exceeded the costs of running the business.
Profit Margin
12%
10%
8%
6%
4%
2%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016
Over the years we can see that the business has continues to consistently grow its profits
year in year out. The historical gross, operating and net quarterly profit margin for Berkshire
Hathaway over the last 10 years has never fallen below 5% and the business currently net profit
margin as of March 28, 2018 of 18.56% which is already 7.56% higher than last year’s closing
position.
The next set of ratios that I will look at is Return on investment (ROI) and return on
equity (ROE) that are two critical profitability ratios that need to be looked at by any business.
Return on investment is equal to the net income from a business divided by the total money
invested expressed as a percentage while Return on equity looks are the net income divided by
the equity of the investor once again expressed as a percentage.

References:
S&P Dow Jones Indices LLC, a division of S&P Global.
Berkshire Hathaway. http://www.berkshirehathaway.com
A Look At Berkshire Hathaway's Many Components |

Investopedia https://www.investopedia.com/articles/markets/082114/look-berkshire-hathaways-
many-components.asp#ixzz5BArXEUU2

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Berkshire Hathaway, despite its immense wealth and influence, is a names that few

Berkshire Hathaway has it humble beginnings in the textile manufacturing industry

Hathaway Manufacturing Company to from what is known today as Berkshire Hathaway.

An Incorporated American corporation company situated Omaha, Nebraska in the United

manufacture, retail, railroads, encyclopaedias, publishing newspapers, uniform manufacture and

several regional electricity and gas utility companies.

American Express (17.6%) and Wells Fargo (9.9%).

the equity of the investor once again expressed as a percentage.

Berkshire Hathaway. http://www.berkshirehathaway.com

A Look At Berkshire Hathaway's Many Components |

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