Perhaps, not many other investors know Warren Buffett's investment vehicle, Berkshire Hathaway Inc. History and current situation.
Mr. Buffett
The history of Berkshire Hathaway can be traced back to the merger of two textile companies (Berkshire Fine Spinning Company and Hathaway Manufacturing Company) in 1955. Warren Buffett first acquired a stake in Berkshire Hathaway in the early 1960s and took full control of the company in 1965. Berkshire Hathaway liquidated its textile business in 1985, when it had become buffett's other investment holding company and corporate acquisition, as he used the cash flow of the original core business to acquire other businesses, first compensated by a company called The National Insurance Corporation.
Warren Buffett began acquiring insurance companies, using floating funds or available reserves (premiums charged before paying any claims) to buy shares in other companies. Berkshire acquired the Government Employees Insurance Corporation (GEICO) in 1996. GEICO initially only served federal government employees because the company believed that providing insurance for government employees rather than the general public was less risky. However, after GEICO was acquired by Berkshire, it also began selling its insurance products to individuals outside the public sector. Today, GEICO is the second largest auto insurer in the United States, insuring more than 27 million cars in the United States.
Over the years, Warren Buffett and vice chairman Charlie Munger transformed Berkshire into a diversified conglomerate whose portfolio currently has a combined market capitalization of more than $500 billion. Berkshire Hathaway has more than 50 wholly owned subsidiaries, which in turn have more than 200 subsidiaries. In addition to insurers such as GEICO, National Indemnity, Berkshire Reinsurance, etc., Berkshire also has well-known companies in other fields, such as See's Candies (acquired by Berkshire in 1972), Burlington Northern Santa Fe (one of the largest freight rail networks in the United States with 8,000 trains and 48,000 employees), dairy queen (A fast-food chain with more than 4,500 stores in the U.S. and more than 2,500 stores worldwide), Benjamin Moore Paints, NetJets, Duracell, and Fruit of the Loom.
Hathaway Mansion
In addition, in addition to its $114 billion cash balance as of March 31, 2019, which includes investments in short-term U.S. Treasury bonds, Berkshire Hathaway's portfolios of many of the largest names in the U.S. are currently worth more than $200 billion. Warren Buffett hopes to use the cash for an "elephant-scale acquisition."
Berkshire Hathaway's portfolio is one of the most closely watched by many investors around the world seeking to keep track of these companies, quarterly, as Warren Buffett increased his portfolio or increased his stake, and those companies fell out of favor that he handled. While a large portion of the portfolio is concentrated in financial services and banking (Bank of America, Wells Fargo, American Express, United Bank of America, JPMorgan Chase, Moody's & Co. and Bnyday Mellon all hold large stakes), Berkshire's largest single stake is Apple.
Berkshire Hathaway began investing in tech companies in 2011, acquiring $10 billion worth of IBM shares and selling them in 2018 (it was a baptism of fire for Berkshire in tech because IBM was a bad investment decision). The company began investing in Apple in 2016 and in a very short time became the top of its portfolio. As of the end of March 2019, Berkshire held 250 million shares of Apple, worth $47 billion. Warren Buffett has publicly declared that he likes the "stickiness" of the Apple ecosystem and believes that Apple's products provide tremendous value to customers. Also in the tech space, earlier this month, Warren Buffett announced that Berkshire Hathaway had acquired a portion of Amazon' stake, even though Amazon's stock price was nearing an all-time high and had soared more than 500 percent in the past 5 years.
The second largest allocation in Berkshire's portfolio is Bank of America, which invested $5 billion in U.S. bank preferred stock and bought 700 million shares of warrants at a price of $7.14 per share during the global financial crisis. These warrants were exercised in 2017. The stocks are currently priced at $28 per share, so they represent a very successful investment by Berkshire Hathaway.
Berkshire Hathaway has held a sizable stake in Coca-Cola since investing $1.3 billion in 1989, currently worth $18.7 billion. Not all Of Berkshire Hathaway's investments have been successful. Warren Buffett began buying Tesco shares in 2006 and continued to increase that position in the years that followed, becoming the company's third-largest shareholder. As Tesco's finances began to deteriorate, Berkshire Hathaway began selling its Tesco stake in 2013, and when Warren Buffett sold it all, he suffered a $444 million loss, one of the biggest losses in the history of his investment firm.
Warren Buffett always says, "There are very few opportunities," so "when gold rains down, take out the bucket instead of the thimble." That's why Berkshire Hathaway always holds a lot of idle cash. He invested heavily in Bank of America and Goldman Sachs when the global financial crises erupted in 2008 and 2009, and of course, that was well utilized.
Some international analysts have described Berkshire Hathaway as "not a bad part" of the S&P 500. Other financial commentators believe that Holding Berkshire