10 Fascinating Things You Probably Didn't Know About Warren Buffett's Berkshire Hathaway
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Everyone knows who Warren Buffett is, but Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), the company that he transformed from a failing textile manufacturer into one of the largest conglomerates in the world, is not well-known by many people. With that in mind, here are 10 things about Berkshire Hathaway that even current shareholders might not be aware of.
1. Berkshire Hathaway is the sixth-largest company in the world, in terms of market capitalization. As of this writing, it is slightly smaller than Facebook and just a bit larger than ExxonMobil.
2. The company's original form is much different than the Berkshire Hathaway of today. In fact, Berkshire's history can be traced back to a textile manufacturing company established in 1839 as the Valley Falls Company, which merged with the Berkshire Cotton Manufacturing Company in 1929.
3. In 1964, Warren Buffett verbally agreed to sell back his shares of Berkshire Hathaway (which he didn't yet control) to the management team at the time for $11.50 per share. Fortunately for Buffett, Berkshire's management lowered their offer slightly to $11.38 per share and Buffett decided not to sell. In fact, the lowered offer infuriated him so much that he decided to buy enough additional stock to take control of the company and fire the people running it. Today, each of those shares is worth approximately $218,000.
4. Berkshire Hathaway was initially a textile company, even after Buffett took control. He didn't expand into the insurance industry for a few years, ultimately acquiring National Indemnity Company in 1967. However, Berkshire's textile operations remained active until 1985.
5. Surprisingly, Buffett has said that purchasing Berkshire Hathaway was his biggest investment mistake of all time, as he bought a failing textile business simply to spite the company's management. He claims that if he had simply bought insurance businesses directly, he would have made another $200 billion over the following 45 years.
6. Although Berkshire Hathaway isn't a widely known brand name, many of its subsidiaries are household names. Just to name a few, these include GEICO, Duracell, Dairy Queen, Fruit of the Loom, Helzberg Diamonds, Oriental Trading Company, The Pampered Chef, and Clayton Homes.
7. Berkshire Hathaway is famous for its stock portfolio of about 45 different companies, but the majority of the portfolio's value is in the stocks of just five companies --Wells Fargo, Kraft Heinz, Coca-Cola, IBM, and American Express.
8. Berkshire Hathaway has about $72 billion in cash on its balance sheet. Even accounting for the $20 billion cash cushion Warren Buffett likes to have at all times, this means that Berkshire could buy PayPal, General Motors, Caterpillar, MetLife, or salesforce.com in cash.
9. Berkshire openly publishes its acquisition criteria and is always looking to grow. To be considered, businesses need to have at least $75 million in pre-tax earnings, a demonstrated consistent earnings power and good returns on equity, a management team in place, and an offering price.
10. Warren Buffett has given away more than one-fourth of his Berkshire shares to charity, and he continues to give away 4% of his remaining holdings every year. In fact, as part of the Giving Pledge that he and Bill Gates started, Buffett is giving away 99% of his wealth to charity, with all of his Berkshire stake to be distributed for current charitable needs within 10 years of his estate's settlement.
Berkshire Hathaway is a truly great company and, as you can see, an extremely interesting one. A cornerstone of my own stock portfolio, Berkshire Hathaway is a diversified investment portfolio run by the best in the business, all in one stock.
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Matthew Frankel owns shares of American Express, Berkshire Hathaway (B shares), Caterpillar, General Motors, and PayPal Holdings. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares), Facebook, PayPal Holdings, and Wells Fargo. The Motley Fool owns shares of ExxonMobil and has the following options: short October 2016 $50 calls on Wells Fargo. The Motley Fool recommends American Express, Coca-Cola, General Motors, and Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.