Warren Buffett, dubbed as the "Oracle of Omaha," founded Buffett Partnership in 1956 with $105,000 when he was still 25 and fresh from studying under investing guru Benjamin Graham at Columbia University. He stayed with the partnership until 1969 when he joined Berkshire Hathaway. He has since become Berkshire Hathawayâ€™s primary shareholder and CEO. Since its inception, Berkshire Hathaway has become one of Americaâ€™s biggest conglomerates, and Buffet became the worldâ€™s second richest man with estimated net worth of approximately $37 billion in 2009. Berkshire Hathaway's core holdings are its insurance companies of which the most significant are GEICO and Gen Re; GEICO is one of the largest auto insurers in the United States. The company prefers low-risk clients, particularly government and military employees, but has in recent years begun taking on greater numbers of average drivers.
Through the years, Berkshire Hathaway has also invested in varied interests, such as Benjamin Moore paints, See's Candies, Dairy Queen and NetJets. The conglomerate has subsidiaries involved in candy production; retail; home furnishings; encyclopedias; vacuum cleaners; jewelry sales; newspaper publishing; manufacture and distribution of uniforms; manufacture, import and distribution of footwear; as well as several regional electric and gas utilities. Its stock is priced at about $100,000 a share in September 2009â€”proof that investing with the company is no mean feat. In addition, the company ventured into purchased stocks in Wrigley, Goldman Sachs and GE totaling $14.5 billion.
Berkshire Hathaway's simple but successful business strategy involves taking the "float"â€”cash income prior to claims payoutsâ€”from its major interest (its insurance companies) and using the cash to buy undervalued businesses, cheap but promising stock and even simple bonds. Likely profit represents the sole determining factor in acquisitions, but Buffett views profitability as correlating to intelligent, responsible management. Refusing to invest in Internet stocks during the 1990s boom, Buffett had the last laugh during the dot-com implosion. Berkshire Hathaway's subsidiaries employed more than 246,000 people in 2008, but only 16, all personal friends and family of the founder, work at the company's world headquarters in Omaha.
Hits and misses
The candid CEO that he is, Buffet is not one who would not own up to his mistakes. In a 2007 annual letter to stockholders, Buffet reported that the firm's 76 businesses "did well overall" in 2007, and the "few that had problems were primarily those linked to housing." The CEO's candid annual letter also documented his mistakes, including what Buffett called the "worst deal" he ever made: buying the show company Dexter. In the letter, he said the move cost his firm's shareholders $3.5 billion, and instead of assuring investors that it won't happen again, he wrote, "I'll make more mistakes in the futureâ€”you can bet on that. A line from Bobby Bare's song explains what too often happens with acquisitions: 'I've never gone to bed with an ugly woman, but I've sure woke up with a few.'"
An uncertain future
Like any other American company, Berkshire has not been spared by the financial crisis, as evidenced by the $1.53 billion loss the company suffered in the early part of 2009 and the one-fifth reduction in its market value from September 2008 to September 2009. Mr. Buffet is no longer as bold as in 2008. This reflects on the companyâ€™s choice of investments. Berkshire has been buying fewer stocks while investing in corporate and government debt. Corporate records also show that it has been selling more stocks than buying new onesâ€”a sign that Buffet is starting to worry about the future, says Alice Schroeder, the author of The Snowball, a biography of Mr. Buffett.
1440 Kiewit Plaza
Omaha, NE 68131
Phone: (402) 346-1400
Employer Type: Public
Stock Symbol: BRK
Stock Exchange: NYSE
Chairman & CEO: Warren E. Buffett
2008 Employees (All Locations): 246,000