What Is Berkshire Hathaway?
Let me explain Berkshire Hathaway directly: it's a multinational holding company that I know owns a wide range of businesses and investments, with a market capitalization topping $900 billion as of 2024. Led by Warren Buffett as chair and CEO, it's based in Omaha, Nebraska. It started as a group of textile mills, but Buffett took control in 1965 when it was struggling, and since then, it's grown into one of the world's largest companies by market cap.
Key Takeaways
You should note that Berkshire Hathaway is a huge holding company run by the famous value investor Warren Buffett since the 1960s. Its market cap exceeds $700 billion, and its Class A shares (BRK.A) are some of the priciest in the market, trading at almost half a million dollars each as of May 2023. It owns well-known private businesses and has big minority stakes in public companies like Apple. Greg Abel is set to take over from Buffett, who is in his nineties and hasn't announced retirement plans yet.
Understanding Berkshire Hathaway
Warren Buffett became the controlling shareholder in the mid-1960s and started redirecting cash from the core business into other investments. As of May 2023, the market cap was over $715 billion, placing it among the top publicly traded companies globally. Berkshire has a strong track record of success and smart investments, ranking as the sixth-largest by market cap at that time. Its stock trades on the NYSE in Class A and B shares; Class A has never split and closed above $500,000 per share in May 2023, while Class B was around $325.
Insurance subsidiaries are a key part of its holdings, but it manages hundreds of diverse businesses worldwide, including Duracell, Dairy Queen, Pampered Chef, Fruit of the Loom, NetJets, and GEICO. Beyond that, Berkshire has a large stock portfolio in companies like Apple, Bank of America, and UPS, valued at more than $346 billion as of December 31, 2022.
Early on, Buffett used the float from insurance operations to invest elsewhere, focusing on long-term holdings. He avoids diversification in favor of overweighting trusted investments for better returns. His approach has made Berkshire's annual meetings a gathering spot for value investors and a focus for media attention.
Stock Performance
Consider this: Berkshire Hathaway's stock returned 3,641,613% from 1965 to 2021, compared to the S&P 500's 30,209%. That translates to an average annual return of 20.1% for Berkshire versus 10.5% for the S&P.
Succession and Control
Succession is a critical issue for Berkshire, especially with Buffett turning 91 in 2021—the question is whether his replacement can keep outperforming the market. In 2010, Buffett said he'd be succeeded by a CEO and two to four investment managers. By 2011, Todd Combs and Ted Weschler were named as managers. In 2018, Ajit Jain took over insurance, and Greg Abel handled non-insurance operations, making them likely successors. Buffett hasn't set a retirement date, but it's reassuring that succession is planned given his age.
On May 1, 2021, Charlie Munger unofficially confirmed Greg Abel as the next CEO; Abel is CEO of Berkshire Hathaway Energy and vice chair of non-insurance operations.
Who Is Warren Buffett?
Warren Buffett is a renowned business owner and investor, famous for leading Berkshire Hathaway since 1964 and its massive success. His value investing style has generated huge wealth for shareholders. Despite his wealth, his frugal lifestyle and approachable demeanor have won him fans worldwide.
What Is Value Investing?
Value investing means buying securities where the intrinsic value exceeds the market value, expecting the market to catch up. Buffett exemplifies this approach, leading to his incredible success.
What Is a Class A Share?
Class A shares typically offer more voting rights than Class B or others, often held by executives to maintain control, such as against hostile takeovers.
The Bottom Line
Berkshire Hathaway, run by Warren Buffett, is a holding company with diverse private businesses and major stakes in public companies like Apple, boasting a market cap over $715 billion and ranking sixth globally. Its success stems from Buffett's value investing, and annual meetings attract value investing fans. Succession is settled with Greg Abel as heir apparent.
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