What is Berkshire Hathaway?

Berkshire Hathaway is a holding firm that owns several companies, including GEICO and Fruit of the Loom which is led by Warren Buffett who serves as its chairman and CEO.

Understanding the Berkshire Hathaway

Berkshire Fine Spinning Associates and Hathaway Manufacturing merged in 1955 to collectively form Berkshire Hathaway. Buffet then proceeded to invest in Berkshire during the 1960s becoming the biggest shareholder at the time and turning it into a conglomerate 7 years later in 1967. In recent years in May of 2021 Berkshire Hathaway’s market value of over $600 billion and is effectively the 9th largest public company in the world.

It isn’t a fluke that such a company becomes as large as it has under the leadership of Warren Buffet, one of the ways Berkshire was so successful is because they used to Float money for their purchases as early in Buffet’s career he had the bright idea to use the float from the various insurance companies Berkshire owned to invest in various stocks for a long period. What Float money is the money being paid to the insurance companies in premiums that have not been paid out yet to cover insurance claims? This means that the money does not belong to the insurance companies but rather is in full control of the manager of said money who can invest the money as they see fit. This amounted to Berkshire having the largest Float of any institution totalling around $77 Billion which allows Berkshire to buy struggling companies like Fruit of the Loom and lift them. However, besides Fruit of the Loom Berkshires many owned Fortune 500 companies pay steady dividends.

Investors should note that Berkshires stock trades in 2 classes, Class A shares, and Class B shares and they have acquired many assets over time mainly consisting of insurance company’s make up a large amount of Berkshire Hathaway but they also manage a variety of other companies. Aside from owning a multitude of companies Berkshire also has a large investment portfolio, consisting of things such as apple.

Speaking of an investment portfolio, Buffet unlike some investors prefers to invest in various trustworthy investments that are overweighed (meaning that these stocks are undervalued at their current price and will rise in future) rather than having a seemingly diverse stock portfolio.

Special Considerations

Berkshire has been under Warren Buffets’ lead as CEO since the 1960s leaving room for the question of succession in recent years. Given that Warren Buffet will turn 92 as of August 2022 many may ask who will lead Berkshire after he eventually decides to step down from his position. Although, In 2010 Buffet announced to the public that he would eventually be succeeded by a small team of a CEO and two or possibly four investment managers. Not so long after in 2011 it was confirmed that Todd Combs and Ted Weschler would be two of the potential 4.

10 years later in the spring of 2021 Charlie Munger, the vice-chair of Berkshire, would announce that Buffet himself would be succeeded by Greg Abel when Buffet resigns. However, to this day Buffet has never officially confirmed Gregory’s succession to his CEO position, Buffet has made comments implying something of the sort within recent years.