The company that Warren Buffett built along with his business partner Charlie Munger is Berkshire Hathaway Inc. Berkshire is a multinational conglomerate holding company that has been run out of its headquarters located on one floor of the Kiewit Plaza building for over 50 years in Omaha, Nebraska in the U.S.
Berkshire Hathaway Inc. is a publicly traded corporate conglomerate that can be purchased on the stock exchange. Warren Buffett used this company to hold his stock investment portfolio and also a holding company for all the great companies he purchased in full using Berkshire funds. It becomes more difficult for Buffett to continue to find great companies at the right price that are also large enough to be meaningful to his portfolio and to Berkshire for added growth due to the size of his portfolio and company.
Berkshire Hathaway Inc. ((BRK.A) has a $568 billion dollar market capitalization based on its A shares. The A shares hold the record for the highest priced stock in history currently around $345,000 as of January 2020 for one share of BRK.A. The reason Berkshire shares are so expensive is that unlike other big cap companies Buffett never split its Class A shares through a stock split.
Berkshire Hathaway did finally do a partial stock split to create Class B shares in 1996. Through a Unit Investment Trust they created BRK.B and kept the per-share value of the smaller shares close to 1⁄30 of the original Class A share price. Berkshire’s Class B stock is the 5th biggest component of the S&P 500 Index as of December of 2019.
Warren Buffett started buying Berkshire Hathaway stock in 1962 after that the stock would go up each time after the company closed a mill. Buffett did understand that the textile manufacturing business of Berkshire was a declining industry in the U.S. Berkshire’s fundamentals were not going to get improve as it slowly went out of business but what he saw was an opportunity for a gain as its stock price was below its book value and money could be made as it liquidated its assets.
Buffet was so offended by an offer to purchase his shares because it was below a verbal agreement he had made that he instead chose in 1964 to buy more Berkshire stock. He gained control of the company their majority ownership and fired the guy who did not honor the oral agreement they made to buy Buffet’s shares at a higher price. This put Buffett in the strange situation of being the majority shareholder of a failing textile business he never really wanted in the first place. He let a quick trading opportunity turn into an investment.
He slowly changed Berkshire from a textile manufacturing company to an insurance and underwriting operation he kept the original name and transformed it into a diversified holding company over the years. He was able to use the cash flow generated from insurance premiums to purchase the cash flowing businesses with growth and sustainability and also to manage a corporate investment portfolio built with great growth companies he bought at good prices. Berkshire Hathaway Inc. continued acquire and grow until it became the fifth biggest company in the world.
Warren Buffett still holds more than 99% of his personal wealth and net worth in Berkshire Hathaway stock. This is one of the very few stocks he directly owns as his investment portfolio is held inside Berkshire Hathaway, which has a current value of over $250 billion and built with the stocks of about 43 companies currently (click for full list).
Berkshire Hathaway Inc.’s cash position set a record for itself in the third quarter of 2019 as it held $128 billion in cash along with short-term U.S. Treasuries. $6 billion was added to Buffett’s $122 billion cash hoard as of September 30, 2019. Buffett continues to look for good companies and investments for Berkshire as he approaches his 90th birthday.
(Omaha Kiewit Plaza the Berkshire Hathaway Building pictured below).