Berkshire Hathaway is famous for its CEO, Warren Buffett, widely held as the greatest investor of all time. The company is an insurance-backed conglomerate; they invest the float (premiums) generated from their insurance arm into various securities and companies, often buying entire companies outright.
Management (Warren Buffett)
Berkshire Hathaway has, arguably, the most skilled and intellectual management in the entire world. Their CEO is Warren Buffett, who is credited as the best investor of all time. He follows Benjamin Graham and David Dodd’s investing teachings, and has made himself the second-richest person in America through value investing. His right-hand man, Charlie Munger, is equally as skilled. He is the vice-chairman of Berkshire Hathaway, but also is chairman at another, extremely smaller, company: Daily Journal (DJCO). In the midst of the financial crash in 2009, Munger decided to convince Daily Journal to invest their excess cash hoard in some select stocks. His idea won approval, and Daily Journal’s stock price has risen over 300% since then.
Growth (Book Value)
Warren Buffett prefers to measure Berkshire’s growth through book value growth, not share price growth. Both of these measurements, however, have grown exceptionally since Berkshire’s IPO in 1980. It’s a tribute to Buffett’s ability to invest that Berkshire’s 5-year book value growth has never under-preformed the S&P 500’s growth rate. In terms of share price growth… if you bought a dollar worth of Berkshire Hathaway at it IPO and spent the same amount of money buying the S&P 500, Berkshire’s stake would be worth $700, while the S&P 500’s would be worth less than $20 (dividends reinvested).
Risks
Berkshire Hathaway is probably one of the best companies in the world to invest in, and its risks are minimal and might not even be fully able to be considered as risks. Often, companies seem to always be searching for new ways to earn money and complain that they aren’t big enough to take on any massive operations that could earn them billions at a time. It is quite the contrary at Berkshire: Warren Buffett says Berkshire will probably not outperform as much as it did in the past for now, since the company is too big. This would cause him to under-perform, since it restricts the selection of companies there is to buy from. If you’re only managing a million dollars, then even spending all your money on one small company is easily manageable. However, if you’re investing the $100 billion Buffett is, then even a small 5% of your portfolio could end up eating up entire companies, and you still won’t feel you have enough. The larger your company grows, the larger and larger your acquisitions have to become, until you find your only able to buy the biggest companies in the entire stock market to fit your portfolio. Keep in mind, however, that is only an excuse for under-performance, not anything that will cause any harm to Berkshire Hathaway. Investors simply shouldn’t expect the outstanding performance Berkshire had over the ages to continue now.
Berkshire Hathaway is an outstanding company with outstanding management and outstanding growth. Many respectable hedge funds already hold it as their top holding, and investors would be prudent to buy as much of it as possible.
Stock Investing Advisor 