Today, there is hardly any investor who has not heard of the name Warren Buffet. In fact, some investors have gone to the extent of studying his investment style so as to adopt his strategies.
The reason for this is not far-fetched. Warren Buffet has attained so much success in the business world purely based on a keen sense of investing and hard work.
This he demonstrated even at a young age when he started running a small business which allowed him to have about $10,000 saved up in the bank by the age of 20.
Over the years, Warren Buffet has been able to build a company that has a net worth of 530 billion dollars. The name of this company is Berkshire Hathaway.
What is Berkshire Hathaway?
Berkshire Hathaway is a multinational conglomerate that has over fifty subsidiaries. Originally, Berkshire Hathaway was a textile manufacturing company. But with the change of leadership, there have been several major reforms. These reforms involve shutting down the textile manufacturing process and including different subsidiaries, such as:
- GEICO
GEICO is an acronym for Government Employees Insurance Company. This insurance company primarily provides insurance coverage for automobiles. As of 2020, its revenue stood at 35.093 billion US dollars.
- Burlington Northern Santa Fe Corporation (BNSF)
Burlington Northern Santa Fe Corporation is a Freight Railroad business that majorly engages in moving industrial and agricultural products and consumer goods. The name Burlington Northern Santa Fe came into existence as a result of merging two organizations. These organizations are Burlington North Inc and Santa Fe Pacific Corp. As of 2019, its estimated revenue was 23.515 billion US dollars.
- McLane Co
McLane Co was a small grocery store. But with time, McLane Co has grown to become a huge supply chain business. As of today, McLane specializes in supplying products to grocery stores, restaurants, and even drug stores. The revenue of McLane in the year 2017 was 50 billion US dollars.
- Precision Castparts Company (PCC)
Precision Castparts Company focuses on making metal parts for different businesses. The major industries that patronize the PCC are power generating and aerospace companies. Consequently, its sales activities as of 2014 led to its 9.6 billion dollars revenue.
- Lubrizol
At the initial stage, Lubrizol was a company that dealt only with the production of graphite oil. However, with time, the company has included the production of other chemicals. This accounted for the generated revenue in 2016 which was approximately 6.5 billion dollars.
Apart from these subsidiaries, Berkeley Hathaway Conglomerate also has large equity stakes with prominent companies. Some of these companies include:
- Coca-Cola
- Apple Inc.
- Bank of America Corporation
- American Express
- Verizon Communications Inc.
With the number of subsidiaries and a large number of equities, Berkeley Hathaway is able to position itself among the top multi-billion organizations around the world. This achievement did not happen as a result of a coincidence but an effective investment strategy.
Who runs it?
In 1965 Warren Buffet and his investment firm bought control of the then-struggling Berkshire Hathaway. This was after Warren Buffet had invested in the company with the hope that the company would thrive. Presently, Warren Buffet holds the position of CEO and has the largest share in Berkshire Hathaway.
Warren Buffet Investing Style and Popular Quotes
Warren Buffett’s investment style was what brought Berkshire Hathaway from the brink of folding up. When Warren Buffet took over, he tried to run the textile manufacturing business. He soon discovered that it was a futile endeavour.
At that point, he decided that the best means of sustaining the company was to divert its capital. This leads us to the quote where he said; “I’d rather have a $10 million business making 15% than a $100 million business making 5%”.
The diversion of resources into other areas caused Berkshire Hathaway textile production to shut down. However, it allowed the company to have several successful subsidiaries. Also, it provided the opportunity to buy equities in other organizations.
It is important to note that Warren Buffet’s acquisition of several successful subsidiaries and the purchase of valuable equity was a result of his investing technique.
Primarily this technique involves searching for undervalued companies and investing in them. This he expressed when he said; “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.”
Furthermore, another technique that Warren Buffet employs is that he only invests in a business that he truly understands. According to him his rule was “Never invest in a business you cannot understand.”
Knowing how a business operates makes it easier to determine the prospects of a company. Most people make investments based on trend following. Even though trend following has proven to be an effective means of investment, it is crucial to have in-depth knowledge before engaging in it.
Additionally, he made it clear that “Never depend on a single income, make an investment to create a second source”. This means that after making a profitable investment, use the returns to float other investments.
Berkshire Hathaway meeting is at the end of April
The Berkshire Hathaway meeting will be an in-person shareholder meeting as opposed to the virtual meetings carried out in the past. The meeting will be taking place at the Catholic Health Initiative Center in Omaha on the 30th of April.
Conclusion
At this present age, Warren Buffet is a living legend when it comes to the aspect of investment. His ability to predict the prospect of a share has earned him the name “Oracle of Omaha”. As a matter of fact, it is safe to say that studying Warren Buffet’s investment moves can make any investor become better.
