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Berkshire Hathaway

Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) is a highly diversified company run by two of the most extraordinary investment minds the world has ever seen: Warren Buffett (born August 30, 1930) and Charlie Munger (born January 1, 1924).

Company Description

Berkshire Hathaway has a wide array of cash producing businesses which is expertly used to purchase additional cash-producing entities, including large ownership stakes in American Express, Anheuser-Busch, Wells Fargo, Proctor and Gamble, and Coca-Cola. It has outright ownership of several leading insurance businesses.

Berkshire Hathaway's stock price has had a compound growth rate of 27.5% from 1967 through 2007.

Every year in the annual letter to shareholders, Warren Buffett begins by reporting the growth in book value for the prior year. Book value has been the yardstick of choice for Berkshire Hathaway because, historically, it has best captured the annual change in intrinsic value. Since 1965, when present management took control, Berkshire's book value has compounded at a rate of 21.1% per year through 2007.

Berkshire Hathaway derives its value from its massive size and its vast amount of insurance float. From 1967 through 2007, Berkshire's float grew 22.3% per year from $18.5 million to $58.7 billion. Warren Buffett reinvests this float in to high return investments including wholly owned subsidiaries and marketable securities. The operating profits from wholly owned subsidiaries and the total market value of investments in marketable securities comprise Berkshire's intrinsic value.

Years Pre-tax CAGR operating earnings
(excluding insurance businesses)
CAGR of investments
1965-1979 11.1% 42.8%
1979-1993 19.1% 25.6%
1993-2007 23.5% 14.3%

Berkshire Hathaway acquired Burlington Northern Santa Fe Railroad in 2010 and Lubrizol in 2011.

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