Berkshire Hathaway: The World’s Largest Holding Company

• After Warren Buffett bought Berkshire Hathaway in 1964, he immediately fired its CEO. The problem was that Buffett and the company had originally agreed on a purchase price for which the latter would buy back Buffett’s shares. Yet afterward, the company offered a lower price than previously discussed. Angered, Buffett bought the controlling share of stock, instead of selling it, and laid the CEO off.
• From 1964 for 44 years in a row, Berkshire Hathaway’s earnings outshone those of the S&P500. From the year of its inception to 2018, the company had an average compound annual growth rate of 20.5%. The S&P 500 index of US companies increased by 15.01% over the same period.
• Although Berkshire Hathaway receives dividends from many companies, it pays none to its shareholders. Under Buffett, Berkshire shareholders collected a dividend only once in 1967. The payout was only $0.10 per share.
• Buffett considers his purchase of Berkshire Hathaway a mistake that cost him more than $200 billion in compounded returns.
• Another mistake Buffett admitted is his acquisition of the company called Precision Castparts (PCC) in 2016. He says that he was unrealistically optimistic about the company’s performance.
• In 2012, at the company’s annual meeting, Berkshire shareholders bought 1,062 pairs of Justin Boots, 12,792 pounds of See’s candy, 11,162 Quikut knives, and 6,344 pairs of Wells Lamont gloves.
• Berkshire’s portfolio consists of two types of companies: those in which it has almost 100% of ownership and those in which it has a smaller ownership stake.
• There are also two common stocks of Berkshire Hathaway listed on NYSE: Class A and Class B. These shares trade at different price levels. Class B shares have a lower market price, which makes them affordable, while Class A looks too expensive to buy to a majority of people. A Class B share is worth about 1/1,500^th of a Class A share.
• Warren Buffett holds about 248,734 Class A shares and 10,188 Class B shares of Berkshire Hathaway.
• Since 1970, Berkshire Hathaway has been managed by Warren Buffett. In 1978, Charlie Munger joined and was then followed by several people attaining a prominent position on the Board.
• The designated successor of Warren Buffett is Greg Abel. In September 2022, Abel spent more than $68 million on the conglomerate’s shares after selling his stake in the company’s Berkshire Hathaway Energy unit for $870 million.
• In lean economic years, Berkshire Hathaway lends a helping hand to struggling companies. In 2009, it gave a loan of $3 billion to Swiss Re and $5 billion to Bank of America in 2009 and 2011. In 2008, Buffett also lent $5 billion to Goldman Sachs and $3 billion to General Electric. As these companies paid from 12% to 15% interest on his loan or 10% dividend, Buffett profited from his generosity.
• The top shareholders of Berkshire Hathaway class B shares are Warren E. Buffett, Ronald L. Olson, Meryl B. Witmer, Vanguard Group Inc., and BlackRock Inc.
• Buffett plans to give nearly all his money to the Bill and Melinda Gates Foundation before he dies. Gates and Buffett have also convinced over 120 of the world’s wealthiest people to follow suit and donate their wealth to philanthropy and charitable causes.

• Berkshire Hathaway’s cash on hand for the quarter ending June 30, 2022, was $30.608 billion, which constituted a 27.64% decline year-over-year.
• Berkshire Hathaway’s total annual revenue in 2021 was $276.1 billion.
• The company’s annual earnings in 2021 amounted to $89.7 billion.
• Stockholders’ equity of Berkshire Hathaway was $514.9 billion in 2021.
• Total assets of the company were $958.8 billion last year. Precisely due to such a large number of assets, Forbes placed Berkshire Hathaway first on its Global 2000 list published in April 2022.  
• The value of the company’s Apple shares amounted in 2021 to $161.2 billion.
• Berkshire Hataway’s stake in American Express hit almost 20% in the early Spring of 2022.  That boosted Berkshire’s earnings because it holds 151.6 million shares in American Express, regarded as its third-largest equity investment behind Apple and Bank of America.  
• Value of property and casualty premiums written by Berkshire Hathaway was $65.3 billion last year.
• Value of life and health premiums written by Berkshire Hathaway was $6.3 billion in 2021.
• Total investments of Berkshire Hathaway Insurance segment was $262.12 billion last year.
• Berkshire Hathaway’s total liabilities for the quarter ending June 30, 2022, were $440.207 billion, which constituted a 1.5% increase year-over-year.
• Berkshire Hathaway’s total annual liabilities in 2021 were $443.854 billion.
• In 2021, the company’s premiums increased by more than 6.4% to $14.15 billion.
• Berkshire Hathaway’s latest twelve months current ratio is 1.4x.
• Last year, Berkshire Hathaway employed 371,653 people.
• Over the past year, Berkshire Hathaway’s shares have provided a total return of 4.33%, outshining the S&P 500’s total negative return of -5.01%.

• Warren Buffett, who is often called the Oracle of Omaha, bought his first stock when he was 11 in 1942. He bought six shares of Cities Service for $38 apiece.
• By the age of 16, Buffett had amassed more than $53,000 from various business ventures and investments.
• Buffett was rejected by the Harvard Business School in 1950. He recalls that the interview with the Harvard alumnus lasted 10 minutes, during which he decided that Buffett would not be admitted. The rejection opened the door for Buffett in Columbia, where his professional life was shaped.
• Buffett consumes at least five 12-ounce servings of Coca-Cola every day. He says: “If I eat 2,700 calories a day, a quarter of that is Coca-Cola.”
• He frequents his favorite Dairy Queen to treat himself to ice cream. Every Sunday, he takes his grandchildren and their friends to Dairy Queen and buys them desserts.
• Since 1958, Warren Buffett has lived in the same house in Omaha that he bought for $31,500. It is a five-bedroom, two-bathroom house.
• Buffett has held an annual fundraiser since 2000. Every year, he auctions off a charity lunch with him on eBay. In 2019, somebody so desperately wanted to share food with Buffett that he placed a bid of $4.57 million. The money raised that year went to the anti-poverty charity GLIDE. The winner had lunch with Buffett at Smith and Wollensky steakhouse in New York. 
• Most of Buffett’s wealth was amassed after he turned 50. When he was 52, his net worth amounted to $376 million. In 2022, Buffett’s net worth is $113 billion. 
• The Warren Buffett Portfolio obtained a 9.11% compound annual return, with a 13.36% standard deviation, in the last 30 years.
• Although Buffett owns a Twitter account, all his tweets are written by his publishers. Buffett never penned a single tweet.
• Buffett wrote only one email in his life, explaining why he does not use Microsoft.
• Warren Buffett spends most of his time reading.
• He plays ukulele, a small guitar with four strings of Portuguese origin. People can hear Buffett play his ukulele at meetings and conventions. 
• In 2006, Buffett said that he would give 85% of his Berkshire Hathaway stock to five foundations. In July 2019, Buffett partly fulfilled his promise by donating $3.6 billion worth of his company’s stock. Since 2006, he has donated an overall $34.5 billion.
• In recognition of his charitable donation, Warren Buffett was awarded the highest civilian honor, the Presidential Medal of Freedom, on February 16, 2011.

A company’s revenue is defined as the amount of money it receives from its customers in exchange for the sales of goods and services. Revenue appears as the top line on an income statement. To understand whata company’s net income is, all its costs and expenses get subtracted from its revenue.

In the first quarter of 2022, Berkshire Hathaway earned $68.832 billion, down 2.1% year-over-year. In the second quarter of the current year, the company’s revenue was only $9.261 billion, dropping a staggering 90.4% and missing analysts’ estimates by 83.9%. This revenue figure is the sum of all operating revenues from the company’s operating subsidiaries ($76.180 billion) and the pretax loss on its investments and derivative contracts (-$66.919 billion). In the same quarter of the previous year, these figures were $69.114 billion and a gain of $27.394 billion, respectively, for a total of $96.508 billion. The third quarter results in 2022 were profitable: Berkshire’s operating earnings, which encompass profits made from the myriad of its businesses, totaled $7.761 billion, signifying a 20% jump from the year-earlier period. This quarter, the conglomerate spent $1.05 billion in share repurchases and brought the nine-month total to $5.25 billion. Berkshire Hathaway’s annual revenue for 2021 was $276.094 billion, a 12.46% growth from 2020. In 2020, its annual revenue amounted to $245.51 billion, marking a 3.58% decrease from 2019. This was the only year when the company’s revenue declined, due to the onset of the pandemic. Berkshire Hathaway’s annual revenue for 2019 was $254.616 billion, which constituted a 2.7% advance from 2018. The upward trajectory of the conglomerate’s revenue is reflected in the table below:

Berkshire Hathaway’s Annual Revenue since 2010 (in $US billion)

Berkshire Hathaway reported its 2023 third-quarter earnings on Saturday, November 4, with Berkshire Hathaway A reporting EPS of $-8, $14.00 worse than the analyst estimate of $6. Revenue for the quarter came in at $93.21B versus the consensus estimate of $89.18B. The company reported a significant rise in Q3 operating earnings, which soared by 40.6% to $10.761 billion. The company’s cash reserve also hit a historical peak, reaching $157.2 billion. Berkshire Hathaway B reported EPS of $-5.88, $10.22 worse than the analyst estimate of $4.34. Revenue for the quarter came in at $93.21B versus the consensus estimate of $89.18B.

Berkshire Hathaway reported its 2023 second-quarter earnings on Sunday, August 6, with Berkshire Hathaway A reporting EPS of $6,930.21, $1,289 better than the analyst estimate of $5,641.59. Revenue for the quarter came in at $92.5B versus the consensus estimate of $82.12B. Berkshire Hathaway B reported EPS of $1.03, $0.04 better than the analyst estimate of $0.99. Revenue for the quarter came in at $22.33B versus the consensus estimate of $22.49B.

Berkshire Hathaway reported its 2023 first-quarter earnings on Saturday, May 6, with operating earnings up around 12% from the prior year to $8.065 billion in the first quarter. The conglomerate posted a $35.5 billion first-quarter profit.

Buffett revealed the best business in Berkshire’s expansive portfolio, stating that “Apple is different than the other businesses we own. It just happens to be a better business.” It was reported that Berkshire has recently held a 5.6% stake in Apple.

In the fourth quarter of 2022, Berkshire Hathaway’s total profits from all its businesses totaled $6.7 billion. This is 7.9% lower than money earned a year earlier when the conglomerate’s profits amounted to $7.285 billion. The main reason for the decline in the company’s operating earnings stems from inflationary pressures. Excluding currency effects, operating profit would have soared by 13%.

Earnings from the company’s railroad, utilities, and energy businesses amounted to $2.2 billion in Q4 2022. This is a small decline from the year earlier. Berkshire Hathaway’s insurance-underwriting business sank to $244 million in the fourth quarter of 2022, compared to $372 million earned during the same period last year. Overall, the company’s net income tumbled 53% to $18.1 billion in the fourth quarter, reflecting lower investment gains.

For the full 2022 year, Berkshire’s overall earnings plunged 125% to a loss of $22.819 billion. This is a decline from earnings of $89.795 billion in 2021. The company’s earnings fell because the market was largely unstable in 2022, leading to a $53.6 billion loss from investment and derivatives. But Buffet characteristically brushed off these figures as meaningless, warning investors that they might be extremely misleading and should not influence their investing decisions.

Last year, Berkshire Hathaway’s most profitable operating business was manufacturing, generating close to $70 billion in revenue. Berkshire Hathaway Primary Group earned the company almost $11.6 billion, whereas Berkshire Hathaway Reinsurance Group generated revenue of about $20.2 billion. An auto insurance subsidiary of the company, GEICO, posted revenue of nearly $37.71 billion in 2021. The table below breaks down Berkshire Hathaway’s last year’s revenue by business sectors:

Berkshire Hathaway’s Revenue in 2021 by Source (in $US billion):

Source: Statista

Net income is defined as a company’s net profit or loss after all revenues, income items, and expenses have been taken into account. In the first quarter of 2022, Warren Buffett’s Berkshire Hathaway proved to be negatively affected by a slowing U.S. economy. The company’s net earnings were $5.6 billion, sliding more than 53% from $11.71 billion in the year-earlier period. In the second quarter, the company recorded an after-tax net loss of $53.038 billion on investment and derivative contracts, compared to its gain of $21.408 billion in the same period in 2021.

Overall, the conglomerate reported a massive net loss in Q2 2022 of -$43.76 billion, hit by volatility in the financial market. The third quarter also brought losses to the conglomerate: it posted a net loss of $2.69 billion, as opposed to a $10.34 billion gain a year before. The loss in Q3 was largely caused by a slide in Berkshire’s equity investments and the market’s volatility. The company suffered a $10.1 billion loss on its investments during the quarter, bringing its 2022 drop to $63.9 billion. Warren Buffett, however, shrugged off the data as inconsequential, saying that an amount of loss in any given quarter should be considered meaningless.

Berkshire Hathaway’s annual net earnings for 2021 climbed to $89.795 billion, which constituted a 111.18% growth from 2020. Its annual net income for the first year of the pandemic was $42.521 billion, a 47.77% drop from 2019. Berkshire Hathaway’s net earnings for 2019 amounted to $81.417 billion, registering a 1924.79% surge from 2018, which so far has proved to be the leanest year in the company’s income history. In the fourth quarter of 2022, the company’s net income sank 53% to $18.1 billion.

To study the fluctuating trajectory of Berkshire Hathaway’s net earnings over the years, see the following table:

Berkshire Hathaway’s Annual Net Earnings from 2010 to 2022 (in $US Billion)    

Sources: CNBC; Reinsurance News

A company’s free cash flow is defined as a measure of financial performance calculated as operating cash flow minus capital expenditures. As of June 30, 2022, Berkshire Hathaway’s cash from operations stood at $35.22 billion. Its cash from investing was -$33.35 billion, while its cash from finances was reported as -$13.32 billion. For the quarter ending on June 30, 2022, Berkshire Hathaway’s free cash flow amounted to $8.528.00 billion. Its annual free cash flow for 2021 was $26.145 billion, constituting a slide of 2.3% from 2020. Berkshire Hathaway’s free cash flow for the first year of the pandemic climbed to $26.761 billion, a 17.85% jump from 2019. In 2019, its annual free cash flow was $22.708 billion, registering a 0.68% drop from 2018.

During the fourth quarter of 2022, Berkshire Hathaway used $2.855 billion to buy back its shares. A year earlier, it repurchased much more shares that totaled $6 billion, though, in the third quarter of 2022, it bought back shares totaling only $1 billion. Overall, in 2022, Berkshire bought back nearly $8 billion in common stock. Yet, despite such formidable spending, the company’s cash hoard jumped to $128.651 billion in the fourth quarter of 2022. This is a significant increase from $109 billion in the third quarter. In his annual shareholder letter, Warren Buffett wrote that Berkshire Hathaway would continue holding a boatload of cash and Treasury bills. He also criticized those people who give bad press to the practice of stock buybacks, calling them silver-tongued demagogues and economic illiterates.

Changes in Berkshire Hathaway’s free cash flow over the years are presented in the table below:

Berkshire Hathaway’s Free Cash Flow from 2010 to 2021 (in $US Billion)

Stockholder’s equity is defined as the total value of assets owned by an investor after deducting and settling liabilities. It is also called a company’s book value. Like owners’ equity, stockholder’s equity is the difference between assets and liabilities, related to a business. The stockholders’ equity of Berkshire Hathaway increased year-on-year from 2009 to 2021. It amounted to over $514.9 billion in 2021. As the stockholders’ equity of Berkshire Hathaway was approximately $135.8 billion in 2009, there has been an overall growth of approximately $379 billion since the end of the previous decade. The upward trajectory of the stockholders’ equity of the company is shown in the following table:

Stockholders’ Equity of Berkshire Hathaway from 2009 to 2021 (in $US Billion)

Source: Statista

Warren Buffett specializes in buying companies and their shares, and in 2022, he bought plenty of stocks. He poured more than $66 billion of cash into stocks, which is considerably more than he did a year ago. One of the company’s most notable purchases in 2022 was Taiwan Semiconductor Manufacturing, a TSMC, the major chipmaker for Apple, a large part of whose shares is owned by Berkshire Hataway. Buffett bought more than 60 million shares of TSMC but dumped a significant portion of them in the fourth quarter.

Keeping his eye on climbing interest rates, Buffett sold other shares, too. He cut down the company’s shares in Bank of New York Mellon and US Bancorp. In the latter company, Berkshire cut its position by more than 90%, reducing its shares to 6.7 million at the end of 2022 and effectively ending its partnership with the bank that lasted for more than 15 years. Berkshire’s shares in Chevron were also reduced. The company sold about 2.4 million shares in the fourth quarter to bring its stake to about 163 million by the end of the year. Yet chevron still remains one of Berkshire Hathaway’s largest holdings, coming with a dividend yield above 3%.

In 2022, Berkshire Hathaway purchased more than 120 million shares of HP, a computer and printer company, valued at about $3.5 billion. For the fiscal year 2022, HP generated $3.9 billion of free cash flow and returned $5.3 billion to shareholders through share repurchases and dividends. HP’s annual dividend yield is about 3.5%. At the same time, Berkshire strengthened its position in Louisiana-Pacific, a building solution company, by more than 20% to more than 7 million shares. Then, it increased its stake in Apple. Berkshire Hathaway now holds more than 895 million shares of the iPhone maker, with its stake worth more than $100 billion.

Warren Buffett also spent more than five billion dollars repurchasing Berkshire stock in 2022. He did this because he believes the shares are undervalued and shareholders will benefit from buying the company’s stocks back.

Warren Buffett has achieved distinctive business success for various reasons, one of which is his unusual management style. Whereas other owners tend to micromanage their corporations, Buffett practices a decentralized, hands-off relationship with Berkshire Hathaway’s other stakeholders and especially with managers of his subsidiary businesses and investors. Because he trusts the people with whom he works and treats every investor as a partner, Buffett’s conglomerate consistently delivers extraordinary results. Instead of submitting their actions to unblinking scrutiny, Warren Buffett generously gives subsidiary companies time and space to make decisions and respond to their specific business environment. The same decentralized management will be practiced in Berkshire Hathaway after he retires, Buffett recently wrote in a letter to shareholders. Therefore, there are reasons to believe that the company will continue to stand out among its competitors and prosper.

Analysts at walletinvestor.com agree that Berkshire Hathaway has bright prospects and foresee a long-term increase in the price of its Class A and Class B stocks. As of writing, Berkshire Hathaway’s Class A quote is equal to $406,010, and the analysts anticipate the price to soar to $705,145 per share by September 2027. Class B stock is predicted to advance, too. The current Class B quote is $269.040. The analysts’ prognosis is that the BRK.B stock will hit $505.648 in 2027. Whether this prediction comes to pass or not, Berkshire Hathaway will probably carry on winning also under Warren Buffett’s successors.