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Berkshire Hathaway 

“Market Cap $309.1 B As of May 2014

At a Glance
  • Industry: Investment Services
  • Founded: 1955
  • Country: United States
  • CEO: Warren Buffett
  • Website:www.berkshirehathaway.com
  • Employees: 302,000
  • Sales: $178.79 B
  • Headquarters: Omaha, Nebraska
Forbes Lists

#5 Global 2000

  • #13 in Sales
  • #19 in Profit
  • #63 in Assets
  • #5 in Market value
Profile

Berkshire Hathaway, Inc. is a holding company, which owning subsidiaries engages in a number of diverse business activities. It engages in insurance businesses conducted on both a primary basis and a reinsurance basis. Berkshire’s operating businesses are managed on an unusually decentralized basis. It provides business functions, such as sales, marketing, purchasing, legal or human resources and there is minimal involvement by Berkshire’s corporate headquarters in the day-to-day business activities of the operating businesses. Its insurance and reinsurance business activities are conducted through domestic and foreign-based insurance entities. The company’s insurance businesses provide insurance and reinsurance of property and casualty risks world-wide and also reinsure life, accident and health risks world-wide. Berkshire’s four underwriting groups includes GEICO, General Re, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group. The company also owns the railroad business of Burlington Northern Santa Fe Corp. and a majority stake in MidAmerican Energy Holdings Co. The company was founded by Oliver Chace in 1839 and is headquartered in Omaha, NE.

Berkshire Hathaway History

Berkshire Hathaway traces its roots to a textile manufacturing company established by Oliver Chace in 1839 as the Valley Falls Companyin Valley Falls, Rhode Island. Chace had previously worked for Samuel Slater, the founder of the first successful textile mill in America. Chace founded his first textile mill in 1806. In 1929 the Valley Falls Company merged with the Berkshire Cotton Manufacturing Company established in 1889, in Adams, Massachusetts. The combined company was known as Berkshire Fine Spinning Associates.

In 1955 Berkshire Fine Spinning Associates merged with the Hathaway Manufacturing Company which was founded in 1888 in New Bedford, Massachusetts by Horatio Hathaway with profits from whaling and the China Trade. Hathaway was successful in its first decades, but it suffered during a general decline in the textile industry after World War I. At this time, Hathaway was run by Seabury Stanton, whose investment efforts were rewarded with renewed profitability after the Depression. After the merger Berkshire Hathaway had 15 plants employing over 12,000 workers with over $120 million in revenue and was headquartered in New Bedford. However, seven of those locations were closed by the end of the decade, accompanied by large layoffs.

In 1962, Warren Buffett began buying stock in Berkshire Hathaway after noticing a pattern in the price direction of its stock whenever the company closed a mill. Eventually, Buffett acknowledged that the textile business was waning and the company’s financial situation was not going to improve. In 1964, Stanton made an oral tender offer of $1112 per share for the company to buy back Buffett’s shares. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender offer in writing, but the tender offer was for only $1138. Buffett later admitted that this lower, undercutting offer made him angry. Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton (which he did). However, this put Buffett in a situation where he was now majority owner of a textile business that was failing.

Buffett initially maintained Berkshire’s core business of textiles, but by 1967, he was expanding into the insurance industry and other investments. Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for Berkshire Hathaway’s other investments). In 1985, the last textile operations (Hathaway’s historic core) were shut down.

In 2010, Buffett claimed that purchasing Berkshire Hathaway was the biggest investment mistake he had ever made, and claimed that it had denied him compounded investment returns of about $200 billion over the subsequent 45 years. Buffett claimed that had he invested that money directly in insurance businesses instead of buying out Berkshire Hathaway (due to what he perceived as a slight by an individual), those investments would have paid off several hundredfold.”

*Information from Forbes.com and Wikipedia.org

**Video published on youtube.com by Warren Buffett