Berkshire Hathaway is the holding company where Warren Buffett, one of the world's richest men (along with his good friend Bill Gates), spreads his risk by investing in a variety of industries, from insurance and utilities to apparel and food, and building materials to jewelry and furniture retailers. Its core insurance subsidiaries include GEICO, National Indemnity, and reinsurance giant General Re. The company's other large holdings include Marmon Group, McLane Company, MidAmerican Energy, and Shaw Industries. Buffett holds more than 20% of Berkshire Hathaway, which owns a majority of more than 50 firms in all and has equity stakes in about a dozen others.
Berkshire Hathaway operates as a holding company with a highly decentralized structure without integrated business functions (such as sales, marketing, purchasing, legal, or human resources). Practicing a minimal day-to-day management leadership style (only setting a tone from the top), the firm owns a diverse group of companies from a variety of industries, with its core subsidiaries being insurance, re-insurance, freight rail transportation, utilities, and energy generation companies.
Berkshire Hathaway's largest non-insurance holdings include Burlington Northern Santa Fe (BNSF), McLane, Marmon, MidAmerican Energy, and Lubrizol. Other subsidiaries include commercial property casualty insurance group Berkshire Hathaway Specialty Insurance, Berkshire Hathaway Energy, and its real estate arm, Berkshire Hathaway Property Advisors. Berkshire also holds significant equity stakes in about a dozen companies, including Coca-Cola and Wells Fargo. In August 2015, the firm agreed to acquire the US areospace components giant Precision Castparts.
Buffett's famed investment vehicle has been enjoying several straight years of revenue and profit growth, highlighting the legendary investors' knack for choosing financially successful companies over the long term.
Berkshire's revenue jumped by 7% to a record-setting $194.67 billion in 2014, mostly thanks to 17% growth in its Railroad, Utilities, and Energy businesses and 6% growth in its insurance businesses. Much of the growth was driven by Berkshire Hathaway Energy, GEICO, and the firm's manufacturing subsidiaries. The firm's Finance and Financial Products businesses declined by 20% for the year, however, offsetting some of Berkshire's top-line growth. With the exception of 2008, Berkshire's revenue has grown every year, and has more than doubled over the past decade.
Higher revenue and lower income tax expenses drove Berkshire Hathaway's net income up 2% to a record $19.87 billion during the same period. Meanwhile, cash from operations surged by 16% to $32.01 billion.
Berkshire Hathaway seeks out large companies with consistent earnings, easy-to-understand business models, and like-minded leadership. Most acquisitions are made with cash, and most firms retain their management after the transaction. Buffett and longtime business partner Charlie Munger attempt to run the company like a small business, albeit on a much larger scale. It operates as a collection of individual enterprises; Buffett and Munger largely keep their hands off portfolio companies' day-to-day operations, but allocate capital and control risk.
In a letter to shareholders, Buffett once declared "Our elephant gun has been reloaded, and my trigger finger is itchy." Hunting big game (i.e. acquiring big companies) has become somewhat of a necessity for Berkshire Hathaway to continue on its growth trajectory, but the company benefits from not being married to any particular industry as it seeks out its quarry. Toward its "big game" investment strategy in early 2016, Berkshire entered new markets after acquiring aerospace components giant Precision Castparts for $32.3 billion (in Berkshire's largest ever deal), and its 2015 acquisition of the Van Tuyl Group, the largest privately-held automotive dealership group in the US. After the largest buyout in retail automotive history was complete, Buffett's firm renamed the Dallas-based dealership group Berkshire Hathaway Automotive. Also in 2015, Berkshire Hathaway completed its acquisition of Procter & Gamble's Duracell battery unit for some $1.7 billion in a transaction that helped investors avoid a big tax bill.
In 2014, Berkshire bought Charter Brokerage, a non-asset based third-party logistics provider for the petroleum and chemical Industries, from Arsenal Capital Partners. It also boosted its energy holdings by buying SNC-Lavalin Group's AltaLink, which allowed it to expand its electricity transmission in western Canada. Additionally that year it bought a wholly-owned subsidiary of Graham Holdings, including WPLG, a Miami television station.
Berkshire Hathaway's $28-billion purchase of ketchup giant H.J. Heinz in 2013 is also a textbook example of the firm's investment strategy, as the firm and its investment partner, Brazil's 3G Capital, took the ketchup maker private to speed its transformation into a global food business. In late 2012 the firm also acquired Omaha-based online party supplier Oriental Trading Company.
Chairman and CEO Buffett is the company's controlling shareholder. He owns about 21% of Berkshire Hathaway's shares.