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The Warren Buffett series Part 3: His empire in one giant chart

by Jeff Desjardins | posted with permission of Visual Capitalist | May 3, 2018

Most people know Berkshire Hathaway as the massive conglomerate that serves as the investment vehicle for Warren Buffett’s $83-billion fortune. However, far fewer people know what this giant does and how it actually makes its money!

This infographic breaks down the many companies and investments that Berkshire Hathaway owns.

It’s the third part of the Warren Buffett series, which Visual Capitalist has done in partnership with finder.com, a personal finance site that helps people make better decisions—whether they want to jump on the cryptocurrency craze or follow Buffett’s more traditional path to financial success.

 

Explore the full-screen version of this graphic.

 

If you look at any ranking of the world’s richest people, you will notice that most of the names derive their wealth from building individual, successful companies.

Topping today’s rich list is Jeff Bezos, who started Amazon in 1994. Further down, you see familiar names like Bill Gates (Microsoft), Amancio Ortega (Zara), Mark Zuckerberg (Facebook), Larry Ellison (Oracle) and so on.

Warren Buffett, who appears third on such a list, is unique in this sense. Through his holding company Berkshire Hathaway, he has bought, sold or invested in hundreds of companies over the years, and their industries are all over the map. These investments include consumer goods companies like Coca-Cola, daily national newspapers like the Washington Post and insurance companies like GEICO.

Buffett currently owns 36.8% of Berkshire—and at the time of publishing, Berkshire Hathaway was worth an impressive $480 billion, employing 377,000 people across many different industries.

Origin story

Although Berkshire Hathaway is today associated with Buffett and his long-time partner Charlie Munger, the origins of the company actually stem from 1839.

The original company was a textile mill in Rhode Island, and by 1948 Berkshire employed 11,000 people and brought in $29.5 million in revenue (about $300 million in today’s dollars).

After Berkshire’s stock began to decline in the late 1950s, Buffett saw value in the company and started accumulating shares. By 1964 Buffett wanted out, and the company’s CEO Seabury Stanton tendered an offer to buy Buffett’s shares for $11.37, which was $0.13 less than he had promised.

This made Buffett mad and, instead of taking the offer, he opted to buy more shares. Eventually he took control of the company and fired Stanton.

The company was his, and the rest is history.

The scoreboard

In the long-running contest of Warren Buffett versus the market, the scoreboard isn’t even close:

  Berkshire Hathaway S&P 500
Total gain (1964-2017) 2,404,748% 15,508%
Compound annualized gain 20.9% 9.9%

Source: BH Annual Report. BH’s market value is after tax and S&P 500 is pre-tax, including dividends.

If you’re wondering how Warren Buffett developed such an impressive investing record, it’s worth seeing Part 2 of this series: Inside Buffett’s Brain.

Revenue by business segments

The Warren Buffett empire is diverse and made up of hundreds of companies in different industries. However, segmenting by revenue does give an idea of how Berkshire makes its money:

  Revenue (Billions, 2017) % of Total
Total $240.7 100%
Insurance $65.5 27%
BNSF $21.4 9%
Berkshire Hathaway Energy $18.9 8%
Manufacturing $50.4 21%
McLane Company $49.8 21%
Service and Retailing $26.3 11%
Finance $8.4 3%

The Berkshire portfolio

Berkshire Hathaway’s portfolio can be broken down into two categories: companies it owns outright (or holds majority stakes) and companies in which it owns significant investments.

Companies owned by Berkshire

Berkshire Hathaway owns well-known brands ranging from Dairy Queen to Duracell. Here are all those companies listed by number of employees:

Industry Company Employees
Total 377,291
Finance Clayton Homes 16,362
Insurance GEICO 38,690
Manufacturing Precision Castparts 31,984
Manufacturing Fruit of the Loom 26,219
Manufacturing Shaw Industries 21,867
Manufacturing The Marmon Group 12,763
Manufacturing Forest River 12,185
Manufacturing Duracell 2,875
Manufacturing Benjamin Moore 1,772
Manufacturing Russell Athletic 1,020
Manufacturing Brooks Sports 638
Railroad and Utilities BNSF Railways 41,000
Railroad and Utilities Berkshire Hathaway Energy 22,773
Service and Retailing McLane Company 23,859
Service and Retailing NetJets 6,314
Service and Retailing BH Media Group 3,719
Service and Retailing See’s Candies 2,439
Service and Retailing Helzberg Diamonds 2,252
Service and Retailing The Buffalo News 618
Service and Retailing Business Wire 486
Service and Retailing Dairy Queen 464
n/a Berkshire Hathaway Corporate Office 26
n/a Other 106,966

Importantly, you’ll notice that there are only 26 employees in Berkshire Hathaway’s corporate office—that’s because Buffett is adamant that portfolio companies need to be well-managed in their own right and he thinks this decentralization is a key to his success.

Investments

Here are the companies in which Berkshire Hathaway has significant investments—the whole portfolio is worth nearly $200 billion:

Company Value (Billions) % of Portfolio
Total 191.2 100.0%
Apple 28.0 14.6%
Wells Fargo 27.8 14.5%
Kraft Heinz 25.3 13.2%
Bank of America 20.0 10.5%
Coca-Cola 18.4 9.6%
American Express 15.1 7.9%
Phillips 66 8.2 4.3%
U.S. Bancorp 4.7 2.5%
Moody’s 3.6 1.9%
Bank of NY Mellon 3.3 1.7%
Southwest Airlines 3.1 1.6%
Delta Airlines 3.0 1.6%
Charter Communications 2.9 1.5%
Goldman Sachs 2.8 1.5%
American Airlines 2.4 1.3%
GM 2.0 1.0%
Monsanto 1.4 0.7%
Visa 1.2 0.6%
Other 18.0 9.4%

The portfolio is pretty much a microcosm of the American economy: it features banks, airlines, consumer goods companies and even tech behemoths like Apple.

Other brands

Lastly, it’s worth noting that Buffett doesn’t stop there—his company also owns 80 auto dealerships, the second-largest real estate broker in the U.S. (HomeServices of America) and even 32 daily newspapers.

Deals that made the empire

The Warren Buffett empire wouldn’t exist without Buffett being involved in some of the most famous deals in business history. Below are some of the big names Buffett has been involved with.

ABC
Buffett helped finance the Capital Cities takeover of ABC—at the time, the largest non-oil merger in history. Eventually CapCities/ABC was sold to Disney.

ESPN
Before ESPN was the household name it is today, Buffett owned a big chunk of it as an upstart sports brand in 1985, as a part of the CapCities/ABC deal.

Heinz
Berkshire Hathaway and 3G Capital led a takeover of Heinz in 2013. This gave Buffett control of trusted brands like HP Sauce, Lea & Perrins, as well as the namesake brand.

Washington Post
Buffett delivered the newspaper as a kid, but later in his life would be the largest outside shareholder of the famous paper.

Salomon Brothers
Buffett helped lead a desperate shakeup at one of Wall Street’s most famous investment banks.

USAir
After almost losing all the $358 million he had invested, Buffett called buying preferred shares in the airline one of his biggest mistakes.

Gillette
Buffett started buying shares in the late 1980s and became Gillette’s biggest shareholder. Buffett made $4.4 billion in paper profit when the company was sold to Proctor & Gamble.

Posted with permission of Visual Capitalist.

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