Seidman Investment Portfolio Organization

 

Company: Berkshire Hathaway
Analyst: Will Hibler
Sector: Conglomerates

Winter 2010 Buy Summary By: Will Hibler
Berkshire Hathaway is a holding company of more than 70 businesses from a variety of different sectors. Run by Warren Buffet and Charles Munger, the company is an icon of value investing principles. This means that Berkshire invests in undervalued companies relative to perceived future earning power, and maintains the investment through perpetuity. Berkshire absorbs risk in its insurance and reinsurance arms and then invests the float. This practice allows a historically low reliance on debt, while generating a strong cash flow. A survey of successful Berkshire investments includes Coca-Cola, GEICO, Proctor & Gamble, American Express, and General Re.

There are two primary reasons that motivated IPO to examine Berkshire as a potential investment: the purchase of railroad operator Burlington Northern, and the consequent 50:1 stock split of B shares. Buffet describes the Burlington purchase as an “all-in” bet on the American economy, and one that may provide a substantial profit considering the firming economic data that suggests the country may come out of recession in the next year.

Berkshire holdings are leaders in their respective industries, and are poised to take a greater share of the overall economy in the next few years. The company’s strong revenue growth, organization structure, and unique culture and philosophy make a case for continued above-average return on capital, and the ability to identify profitable investment opportunities.

Berkshire Hathaway recently replaced Burlington Northern in both the S&P 500 and 100.

Page last modified March 11, 2012