The history of Berkshire Hathaway can be traced back to its origins as two separate textile manufacturing companies: Berkshire Fine Spinning Associates and Hathaway Manufacturing Company.
Berkshire Fine Spinning Associates was founded in 1889 in Adams, Massachusetts, and was engaged in the production of cotton textiles. Hathaway Manufacturing Company, established in 1888 in New Bedford, Massachusetts, manufactured cotton cloth and shirt collars.
In 1955, both companies were struggling financially, and a young investor named Warren Buffett saw an opportunity to invest in them. Buffett acquired a significant stake in Berkshire Hathaway (as it was named after the merger of the two companies) and became the majority shareholder.
Initially, Buffett’s intention was to turn around the struggling textile business. However, over time, he realized that the textile industry was not as lucrative as he had hoped. Berkshire Hathaway’s textile operations continued to face challenges, including increasing competition from low-cost foreign manufacturers. Despite efforts to improve efficiency and profitability, the textile division gradually declined.
In the 1960s, Buffett began using Berkshire Hathaway as an investment vehicle for his expanding portfolio. He started acquiring shares of other companies, particularly in the insurance industry, as he recognized the potential for generating significant returns through insurance underwriting and investment of the “float” (premiums collected but not yet paid out in claims).
One of the key turning points for Berkshire Hathaway came in 1967 when Buffett made a significant investment in the insurance company National Indemnity Company. Over time, Berkshire Hathaway acquired more insurance companies, including GEICO in 1996, which became one of its most successful holdings.
As Buffett’s reputation as an astute investor grew, more individuals and institutions were drawn to investing in Berkshire Hathaway. The company’s annual shareholder meetings in Omaha, Nebraska, became highly anticipated events, with Buffett’s investment wisdom and insights attracting widespread attention.
Throughout the years, Berkshire Hathaway continued to diversify its holdings by acquiring companies across various industries. The conglomerate expanded into sectors such as energy, manufacturing, retail, transportation, services, and more. Buffett’s investment strategy focused on acquiring businesses with strong competitive advantages and long-term growth potential.
Under Buffett’s leadership, Berkshire Hathaway has become one of the largest and most respected conglomerates in the world. Its performance has consistently outpaced the broader market, and Buffett’s value investing principles have influenced generations of investors.
Today, Berkshire Hathaway remains a holding company with a diverse portfolio of subsidiary companies, publicly traded stocks, and other investments. While its textile operations have been largely phased out, the company’s success is primarily driven by its insurance and reinsurance businesses, as well as its investments in various industries.
A list of companies owned by Berkshire Hathaway
- Geico: Berkshire Hathaway acquired Government Employees Insurance Company (Geico) in 1996. Geico is one of the largest auto insurance companies in the United States.
- BNSF Railway: Berkshire Hathaway acquired Burlington Northern Santa Fe (BNSF) Railway in 2010. BNSF is one of the largest freight railroad networks in North America.
- Berkshire Hathaway Energy: This subsidiary encompasses several energy-related companies, including MidAmerican Energy Holdings Company and PacifiCorp. It operates in the utilities sector, including electricity generation, transmission, and distribution.
- Berkshire Hathaway Automotive: Berkshire Hathaway owns a group of automobile dealerships across the United States.
- Clayton Homes: Berkshire Hathaway acquired Clayton Homes in 2003. Clayton Homes is one of the largest manufacturers and sellers of manufactured and modular homes in the United States.
- See’s Candies: See’s Candies is a confectionery company based in California. Berkshire Hathaway acquired it in 1972.
- Dairy Queen: Berkshire Hathaway acquired the Dairy Queen chain of fast-food restaurants in 1997. Dairy Queen is known for its soft-serve ice cream and quick-serve food items.
- Duracell: Berkshire Hathaway acquired Duracell, a leading manufacturer of batteries and power solutions, in 2016.
- Precision Castparts Corp. (PCC): Berkshire Hathaway acquired PCC in 2016. PCC is a global manufacturer of complex metal components and products for industries like aerospace, power generation, and industrial markets.
- Lubrizol Corporation: Lubrizol is a specialty chemical company acquired by Berkshire Hathaway in 2011. It produces and supplies a wide range of additives for various industries.
- Marmon Holdings: Berkshire Hathaway acquired Marmon Holdings in 2008. Marmon is an industrial conglomerate with diverse businesses, including manufacturing, transportation services, and distribution.
- Berkshire Hathaway HomeServices: Berkshire Hathaway has a real estate brokerage franchise network operating under the Berkshire Hathaway HomeServices brand.
- NetJets: NetJets is a private jet fractional ownership and rental company. It was acquired by Berkshire Hathaway in 1998.
- FlightSafety International: Berkshire Hathaway acquired FlightSafety International in 1996. It provides aviation training services, including flight simulators and programs for pilots and other aviation professionals.
- International Dairy Queen: In addition to Dairy Queen, Berkshire Hathaway owns the international rights to the Dairy Queen brand, which includes various fast-food restaurant concepts.
- Berkshire Hathaway Specialty Insurance: Berkshire Hathaway operates its own insurance company, offering specialty insurance products and services.
- Fruit of the Loom: Berkshire Hathaway acquired Fruit of the Loom, a global manufacturer and marketer of clothing and apparel, in 2002.
- Benjamin Moore & Co.: Benjamin Moore is a manufacturer and retailer of premium paints and coatings. Berkshire Hathaway acquired the company in 2000.
- Business Wire: Business Wire is a global press release distribution company. It was acquired by Berkshire Hathaway in 2006.
- Shaw Industries Group: Shaw Industries is one of the world’s largest carpet manufacturers and a leading flooring provider. Berkshire Hathaway acquired the company in 2001.
- XTRA Corporation: Berkshire Hathaway acquired XTRA Corporation, a leading lessor of over-the-road trailers and intermodal equipment, in 2001.
- The Pampered Chef: The Pampered Chef is a direct seller of high-quality kitchen tools and cookware. It was acquired by Berkshire Hathaway in 2002.
- Oriental Trading Company: Oriental Trading Company is a direct retailer of party supplies, toys, and novelties. Berkshire Hathaway acquired the company in 2012.
- Johns Manville: Johns Manville is a manufacturer of insulation, roofing materials, and engineered products. It was acquired by Berkshire Hathaway in 2001.
- Russell Brands: Russell Brands is a manufacturer and marketer of athletic apparel and sporting goods. It was acquired by Berkshire Hathaway in 2006.
Berkshire Hathaway’s philosophy
Berkshire Hathaway’s philosophy with the companies it acquires can be summarized by a long-term perspective, decentralized management, and a focus on maintaining the acquired companies’ existing culture and operations. Warren Buffett, the chairman and CEO of Berkshire Hathaway, has often emphasized the importance of acquiring businesses with strong fundamentals and competitive advantages. Here are some key aspects of Berkshire Hathaway’s philosophy:
- Long-term ownership: Berkshire Hathaway’s approach is to acquire companies with the intention of holding them indefinitely. They are not typically acquired with the intention of short-term financial engineering or rapid restructuring. This long-term perspective allows the acquired companies to continue focusing on sustainable growth and value creation.
- Autonomy and decentralized management: Berkshire Hathaway believes in decentralized management and respects the autonomy of the companies it acquires. The goal is to let the acquired companies continue operating with their existing management teams and corporate cultures. Buffett has often stated that Berkshire Hathaway’s role is to allocate capital and provide support while allowing the acquired companies to run their businesses independently.
- Hands-off approach: Berkshire Hathaway generally adopts a hands-off approach and does not interfere with the day-to-day operations or micromanage the acquired companies. Buffett has expressed a preference for investing in companies that have excellent management in place and do not require his direct involvement.
- Emphasis on intrinsic value: Berkshire Hathaway focuses on the intrinsic value of the companies it acquires. Rather than being driven solely by short-term financial metrics or quarterly results, the company seeks businesses that have durable competitive advantages, strong cash flows, and the potential for long-term growth.
- Alignment of interests: Berkshire Hathaway looks for companies with management teams and owners who have a significant portion of their net worth tied to the success of the business. This alignment of interests helps ensure that the acquired companies’ management remains committed to long-term value creation.
- Financial strength and stability: Berkshire Hathaway seeks to acquire companies with strong financials and a history of profitability. It prefers businesses that can generate consistent cash flows, as this provides a stable foundation for further growth and resilience during economic downturns.
- Conservative capital structure: Berkshire Hathaway favors companies with conservative capital structures and a disciplined approach to financial management. It generally avoids companies with excessive debt burdens or those that rely heavily on financial leverage.
- Synergy and collaboration: While Berkshire Hathaway encourages collaboration and sharing of best practices among its subsidiary companies, it respects the unique nature of each business. The company believes in preserving the corporate cultures and identities that have contributed to the success of the acquired companies.
It’s important to note that while these principles guide Berkshire Hathaway’s approach to acquisitions, each transaction is unique, and the company’s strategy may evolve over time. Buffett and his team carefully evaluate opportunities on a case-by-case basis, considering factors such as industry dynamics, growth potential, and management quality before deciding to acquire a company.