{"id":4874,"date":"2021-04-29T10:41:42","date_gmt":"2021-04-29T15:41:42","guid":{"rendered":"https:\/\/lions.financial\/?p=4874"},"modified":"2023-05-01T13:55:10","modified_gmt":"2023-05-01T18:55:10","slug":"berkshire-hathaway-analysis","status":"publish","type":"post","link":"https:\/\/lions.financial\/hi\/berkshire-hathaway-analysis\/","title":{"rendered":"Berkshire Hathaway Analysis"},"content":{"rendered":"
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\"Berkshire<\/a><\/p>

Lions Financial<\/a> focuses\u00a0on helping companies in the business insurance industry through capital markets financing and business consulting engagements<\/a>. We have compiled a brief overview of Berkshire Hathaway’s investments over the years and its business Risk Management considerations.<\/p>

\"Company<\/a><\/p>

Berkshire Hathaway is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. The company wholly owns GEICO, Duracell, Dairy Queen, BNSF, Lubrizol, Fruit of the Loom, Helzberg Diamonds, Long & Foster, FlightSafety International, Pampered Chef, Forest River, and NetJets with their managements, and also owns significant minority holdings in U.S. public companies Kraft Heinz Company, American Express, Wells Fargo, The Coca-Cola Company, Bank of America, and Apple.<\/p>

\"Executive<\/a><\/p>

Berkshire Hathaway is controlled and led by Warren E. Buffett, who is the chairman and CEO of Berkshire Hathaway, and by Charles Thomas Munger, who is one of the vice chairman of Berkshire Hathaway as Warren Buffett\u2019s partner. Early in his career at Berkshire Hathaway, Buffett engaged in long-term investments in publicly traded companies, but recently he has acquired the entire company more frequently. Berkshire now has a variety of businesses including confectionery, retail, railroads, furniture, encyclopedias, vacuum cleaner manufacturers, jewelry sales, uniform manufacturing and distribution, and electric and gas utilities in some regions.<\/p>

Berkshire Hathaway Class B stock has been at times the eighth-largest component of the S&P 500 index. The company is famous for getting hold of the highest share price in the history of the New York Stock Exchange with Class A shares.<\/p>

There are currently 16 people on the board of directors of Berkshire Hathaway, which consist of 5 Executive Directors and 11 Non-Executive Directors. The average age of the board is 72.8, and 75.8 for the Executive Board, 72.9 for non-executives. With the relatively old average age in the Executive team, one risk revealed in the annual report 2019 is that the company is \u201cdependent on a few key people for our major investment and capital allocation decision\u201d An unexpected change to Warren E. Buffett and Charles T. Munger specifically can have a negative effect on the company. Both of them claim to have good health conditions but the company seems to lay a potential succession plan to mitigate the risk.<\/p>

In 2018, Gregory Able and Ajit Jain were appointed to be the vice chairman of non-insurance operations and insurance operations. Top executives have stated that the company has prepared for the successor of Warren. Buffet has stated that he will not sell any Berkshire shares, and all of them will convert to Bs shares and distrust the various foundations on a scheduled distributed date. The non-executive and independent directors will continue to serve as guardians for protecting shareholders\u2019 interests.\u00a0<\/p>

Source From: <\/b>Fintel.io<\/b><\/a><\/p>

\"Stock<\/a><\/p>

Berkshire Hathaway owns 46 companies\u2019 publicly-traded U.S. stocks according to the data from Berkshire Hathaway 13F filing.<\/p>

\"Berkshire<\/a>\u00a0<\/p>

Source From : <\/span>Fintel.io <\/span><\/a>& <\/span>Kip linger<\/span><\/a><\/span><\/p>

\"Acquisition<\/a><\/p>

Berkshire\u2019s acquisition criteria set the basic rules of acquisition to the public. The company targets large purchases on companies with over $75 million of pre-tax earnings and consistent earning power. The company has to have good management as Berkshire does not provide it. Technology companies are not favored by Berkshire and Buffett.<\/p>

Berkshire Hathaway has made over 65 acquisitions with information in the company 10-K and news forms the foundation of acquisition strategy analysis.<\/p>

Performance<\/strong><\/h6>

The company does not disclose financial reports on individual companies. Each year they give a performance analysis on important entities, but the analysis lacks consistent benchmarks and specific data. Therefore, it is hard to evaluate the effect of acquisition and determine whether or not the deal is successful.<\/p>

Thought and Deal Process<\/strong><\/h6>

Buffett uses the disclosed acquisition criteria to screen out a lot of unqualified candidates. Based on the available information on past acquisitions, the final decision is always based on Buffett himself and Charlie Munger, the vice president of Berkshire.<\/p>

Amount and Payment Structure<\/strong><\/h6>

The price is based on the acquirers themselves. Among the disclosed acquisitions collected, they are made in a combination of stock and cash, but some have been made with stock alone. Among the stock exchanges include RC Willey and Helzberg Diamonds which were both purchased with Berkshire stock exchange. Duracell and WPLG were made by an exchange of other companies\u2019 stock. Precision Castparts and BNSF are among the disclosed private acquisitions.<\/p>

General Re was also made in exchange for Berkshire’s stock. The General Re case is important because the transaction was finished by issuing 272,200 shares of new supplies. The price was at the company\u2019s fair value then, this new issuance increased shares outstanding by over 20 percent. With the share price increase over the years, Berkshire shareholders \u201cgive far more than they receive\u201d as Buffett wrote in his 2017 letter.<\/p>

Dexter Shoes was another failed investment that was paid in stocks back in 1993. The company value went to nothing soon after the purchase. The $434 million stock used for purchase was worth $6 billion in 2016.<\/p>

The great performance of Berkshire Hathaway is one advantage in acquisition. Its stock can be very appealing to potential acquirers and may convince them to sell the company at a discount. Based on the known information, Buffett is getting more reluctant to use stocks in purchases.<\/p>

Industry<\/strong><\/h6>

There are two types of acquisitions:<\/p>

1) Sizable stand-alone acquisitions;<\/p>

The first type of acquisition focuses on companies such as Precision Castparts and Fruit of the Loom, industries such as Clothing, Luxury items, and Food and Beverages. Although in the same industries, the companies within usually operate independently.<\/p>

2) Bolt-on acquisitions that fit with businesses they already own.<\/p>

The second type will be represented by insurance with eleven companies on the subsidiary list. It is apparent that Buffett has a list of industries that he prefers and understands. As stated in the acquisition criteria, the industries are fairly traditional and without advanced technologies to use in industry guidelines.<\/p>

\"Risk<\/a><\/h3>
Berkshire Hathaway will identify their risks, for example in the 10K of 2019, where the company lists the issues it is facing with the below risks.<\/h6>
\u00a0<\/h6>