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 a significant stake in 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.
Over 75% of the firm's revenue is tied to its insurance businesses. The firm generated more than 50% of its total revenue from insurance subsidiary sales and service income during 2015, while another 20% came from insurance premiums earned. Almost 20% of its total revenue came from its railroad, utilities, and energy subsidiaries, while about 5% came from its finance and financial product subsidiary companies.
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. With the exception of 2008, Berkshire's revenue has grown every year, and has more than doubled over the past decade.
Berkshire's revenue climbed 8% to a record-setting $210.8 billion during 2015, mostly thanks to 11% growth in its insurance businesses (including strong investment gains within these businesses), especially through GEICO with greater demand for auto policies. The firm's Finance and Financial Products business income grew 12% with higher home sales volumes; higher transportation equipment leasing income from larger rail/tank car fleets and lease rates; and greater derivatives gains.
Revenue growth in 2015 drove Berkshire Hathaway's net income up 21% to a record $24 billion. The firm's operating cash levels dipped 2% to $31.5 billion for the year after adjusting its earnings for non-cash investment gains.
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, Berkshire entered new markets after acquiring aerospace components giant Precision Castparts for $32.3 billion (in early 2016, in Berkshire's largest-ever deal), and after buying The Van Tuyl Group, the largest privately-held automotive dealership group in the US (early 2015). After the largest buyout in retail automotive history was complete, Buffett's firm renamed the Dallas-based dealership group Berkshire Hathaway Automotive. In May 2016, Berkshire Hathaway took advantage of tech giant Apple's low stock price and invested over $1 billion in the company's stock.
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.
Chairman and CEO Buffett is the company's controlling shareholder. He owns about 21% of Berkshire Hathaway's shares.
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.