Berkshire Hathaway is where Warren Buffett, one of the world's richest men (along with Mexico's Carlos Slim and Warren's good buddy 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. Known as the Oracle of Omaha, 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.
The firm's core operations -- insurance and utitilies -- performed well while its holdings related to homebuilding muddled through the economic downturn. Berkshire Hathaway's largest non-insurance holdings include Burlington Northern Santa Fe (BNSF), McLane, Marmon, MidAmerican Energy, and Lubrizol. Berkshire also holds significant equity stakes in about a dozen companies, including Coca-Cola and Wells Fargo.
Berkshire's newest enterprise, launched in mid-2013, is Berkshire Hathaway Specialty Insurance, a commercial property casualty insurance group. The new Boston-based venture, which underwrites property, casualty, professional, and executive liability insurance and programs, is focused primarily of the US market.
Buffett's famed investment vehicle reported approximately $162.5 billion in revenue in 2012, a 13% increase over 2012. Berkshire Hathaway's net income increased 45% over the same period. Increased revenue from its insurance and railroad holdings, as well as its utilities and energy operations, fueled the gain. Indeed, with the exception of 2008, the company's revenue has increased steadily, more than doubling over roughly the past decade.
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.
The firm is always on the hunt for large acquisitions. In 2014 it's boosting its energy holdings by buying SNC-Lavalin Group's AltaLink, which will allow it to expand its electricity transmission in western Canada. Berkshire Hathaway has also agreed in 2014 to buy Procter & Gamble's Duracell battery unit in a complex transaction that helps the investor avoid a big tax bill. In 2014 it also bought a wholly owned subsidiary of Graham Holdings, including WPLG, a Miami television station.
In a recent letter to shareholders, Buffett said that "Our elephant gun has been reloaded, and my trigger finger is itchy." Hunting big game 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. Berkshire Hathaway's $28-billion offer for food giant H.J. Heinz in 2013 is a textbook example of the firm's investment strategy. Berkshire and its investment partner, Brazil's 3G Capital, are taking the ketchup maker private to speed its transformation into a global food business. In late 2012 the firm acquired Omaha-based online party supplier Oriental Trading Company.
Although the company's performance -- or, rather, its leader's performance -- is always a hot topic, investors are becoming increasingly mindful of, and speculative about, his health and the future leadership of Berkshire Hathaway. Apparently, it will take several men to replace him. Buffett, 82, has acknowledged his mortality by announcing a successor: Berkshire Hathaway's next CEO will come from one of its portfolio companies, though Buffett did not reveal him, other than saying it will indeed be a man; there are also two backup plans. According to the primary plan, whenever Buffett steps down -- he has no plans to do so -- his son, Howard Buffett, will become chairman and the executive-to-be-named-later will be CEO. In a surprise move, he tapped obscure hedge fund manager Todd Combs to succeed him as chief investment officer. Candidates to be Berkshire Hathaway's next chief executive include the heads of GEICO, Berkshire Hathaway Reinsurance, and BNSF.
Chairman and CEO Buffett is the company's controlling shareholder. He owns about 21% of Berkshire Hathaway's shares.