Berkshire Hathaway

• 1. Introduction

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  Berkshire Hathaway has a share price that looks like a typo. In August 2024, a single Class A share reached $700,000, the highest per-share price of any public company in the world. That same month, the company became the first non-technology business valued at more than $1 trillion. Yet at the end of 2024, its corporate headquarters in Omaha, Nebraska, held only 27 employees. A firm of that size, run from such a small office, raises obvious puzzles. Why has its board historically refused to split the stock? How does a business that began by making fabric end up owning railroads, candy shops and insurers? And what happens to a company when the chief executive who shaped it leaves the job?

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• 2. Textile Roots

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  Berkshire Fine Spinning Associates drew its name from Berkshire County, Massachusetts, where it was based. Hathaway Manufacturing Company carried the name of its founder, Horatio Hathaway. The two firms merged in 1955 to form a textile maker headquartered in New Bedford. At the start it had 15 plants, more than 12,000 workers and over $120 million in revenue. The good times were short. Seven of those locations were closed by the end of the 1950s, accompanied by large layoffs.

  In 1962, an investor named Warren Buffett began buying the stock for his fund, Buffett Partnership Ltd., at $7.50 per share. His bet was simple. As the company liquidated its mills, he expected a tender offer that would let him sell at a profit. A year later, his fund owned 7% of the company. In that same year, 1962, he set up his office in Omaha, in the building now called Blackstone Plaza and formerly named Kiewit Plaza.

  Other backers followed. Franklin Otis Booth Jr. invested $1 million in 1963, and David Gottesman invested in 1968. Both men eventually became billionaires.

  The plan to cash out fell apart in 1964. Buffett offered to sell his shares back to the company for $11.50 each, and the manager, Seabury Stanton, told him orally that they had a deal. A few weeks later, the written tender offer arrived at only $11.375 per share. Buffett later admitted that the lower offer made him angry.

  Instead of accepting, he bought more stock at an even higher price, took control of the company and fired Stanton. Stanton and his son resigned in 1965. The victory left Buffett's fund holding a major interest in a declining textile business.

  Buffett has called buying the textile company the biggest investment mistake he ever made. By his estimate, it denied him about $200 billion in compounded returns over the following 45 years. He has also estimated that putting the same money straight into insurance businesses would have paid off several hundredfold. The last textile operations were shut down in 1985.

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• 3. Insurance Float

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  In March 1967, Berkshire paid $8.6 million for National Indemnity Company, based in Omaha. Jack Dabney Ringwalt had founded it in 1940. It was the first acquisition under Buffett's control and the company's entry into the insurance business.

  Insurers collect premiums before they pay claims. Berkshire calls the premiums it retains the float, and the float became an important source of capital. Its insurance companies invest policy premiums in a portfolio of stock investments that does not give Berkshire control of the businesses it holds. Those holdings are broadly disclosed in the company's Form 13F filings, although it sometimes obtains permission to keep active trades confidential.

  GEICO shows how the strategy deepened over time. Berkshire first invested in 1976, when GEICO was facing financial difficulty and had a very low stock price. In January 1996, Berkshire bought the 49% it did not already own for $2.3 billion. The company is based in Chevy Chase, Maryland, and sells private passenger automobile insurance directly to individual consumers. It is known for its advertising characters, including a gecko and the GEICO Cavemen.

  In December 1998, Berkshire bought Gen Re, based in Stamford, Connecticut, for $22 billion. It paid with Class A shares valued at $58,400 each. Buffett later said he overpaid, despite strong performance by General Re.

  The insurance arm kept widening. In December 2007, Berkshire bought NRG (Nederlandse Reassurantie Groep) from ING Group. In the same month, with the stresses behind the 2008 financial crisis forming, it created a company to insure municipal bonds, starting with New York State bonds. In March 2011, a non-direct subsidiary named BerkshireInsurance.com made Berkshire's first foray into the Indian insurance sector. In 2012, National Indemnity bought the workers' compensation insurer GUARD for $221 million.

  The most recent big insurance purchase came in October 2022, when Berkshire bought Alleghany Corporation for $11.6 billion. Berkshire reduced the price by whatever fees it paid to investment bankers. The move was touted as an example of Buffett's "disdain" for investment bankers.

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• 4. Everyday Brands

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  See's Candies cost Berkshire $25 million in 1972. The company makes boxed chocolates and other confectionery in two large kitchens in California. About 50% of its annual revenue arrives in November and December. By 2019, that $25 million investment had returned over $2 billion, an 8000% return.

  Furniture became a recurring theme. Nebraska Furniture Mart was bought in 1983 for $60 million, and it acquired Homemakers Furniture in 2000. RC Willey Home Furnishings followed in May 1995, Star Furniture in June 1997, and Jordan's Furniture in October 1999 for an estimated $200 million to $300 million.

  Jewelry came by chance. Helzberg Diamonds, a Kansas City chain that began in 1915, joined Berkshire in 1995 after a chance run-in on a New York City street between Buffett and Barnett Helzberg. Ben Bridge Jeweler, a chain established in 1912 and based mainly in the western United States, was bought in May 2000.

  In October 1997, Berkshire bought Dairy Queen, based in Edina, Minnesota, for $585 million. It franchises approximately 6,000 stores operating as Dairy Queen, Orange Julius and Karmelkorn. Clothing arrived in April 2002, when Berkshire paid $835 million in cash for Fruit of the Loom. Garanimals joined in September 2002 for $273 million.

  In October 2002, Berkshire bought The Pampered Chef, the largest direct seller of kitchen tools in the United States. Its headquarters are in Addison, Illinois. A network of more than 65,000 independent sales representatives sells its products through home-based party demonstrations.

  Some purchases came with promises. When Berkshire acquired the paint maker Benjamin Moore in December 2000, Buffett agreed not to sell its products through major retail chains. Shaw Industries, the world's largest carpet manufacturer by revenue and volume, was bought in two steps. Berkshire took 87% in January 2001 and the remaining 12% in January 2002.

  On wheels, Berkshire bought Forest River, the world's largest seller of recreational vehicles, from Pete Liegl for $800 million in July 2005. Clayton Homes, a maker of manufactured housing, came in August 2003 for $1.7 billion. In 2016, Berkshire paid $4.7 billion in Procter & Gamble stock it already owned for the battery maker Duracell.

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• 5. Giant Purchases

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  In April 2007, Berkshire bought 10.9% of BNSF Railway for $3.23 billion. In February 2010, it paid $26 billion for the rest. That deal remains the largest acquisition in Berkshire's history.

  The next giant purchase came with a later regret. In January 2016, Berkshire acquired Precision Castparts Corp. for $32.1 billion. In 2020, Buffett said he had overpaid and wrote down the company's value by approximately $10 billion.

  Heinz followed a similar arc. In 2013, Berkshire and 3G Capital bought H. J. Heinz Company for $28 billion including debt. Heinz merged with Kraft Foods in 2015 to form Kraft Heinz. In 2019, Buffett said that he had overpaid in the deal.

  Pilot Flying J, the truck stop chain, was bought in stages. Berkshire paid $2.8 billion for 38.6% in 2017 and $8.2 billion for another 41.4% in 2023. It paid $3 billion for the remaining 20% in 2024. Two Berkshire Hathaway Energy executives became its CEO and CFO, while Jimmy Haslam stayed on as chairman.

  Utilities form another pillar. Berkshire bought MidAmerican Energy Holdings in 1999, but its voting interest was limited to 10% until the Public Utility Holding Company Act of 1935 was repealed in 2005. In 2005, Berkshire bought PacifiCorp for $5.1 billion in cash and assumed $4.3 billion of its debt and preferred stock. MidAmerican became Berkshire Hathaway Energy in April 2014. The division also owns a residential real estate brokerage, rebranded as HomeServices of America in March 2013.

  Newspapers took a more winding path. Berkshire bought the Buffalo Evening News in 1977 and revived a Sunday edition that had ceased in 1914. In June 2012, it paid $142 million in cash for 63 newspapers from Media General. In 2020, Lee Enterprises acquired the newspapers and The Buffalo News for $140 million in cash. As part of the sale, Berkshire lent Lee $576 million.

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• 6. Crisis Loans and Stock Bets

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  In September 2008, at the peak of the financial crisis, Berkshire put $5 billion into preferred stock of Goldman Sachs. Capital markets had become constrained, and Goldman needed a source of funding. The preferred stock paid 10% a year, or $500 million in interest. Berkshire also received warrants to buy 43.5 million shares at $115 each, exercisable for five years.

  Goldman had the right to buy back the preferred stock at a 10% premium. It did so in March 2011, paying Berkshire $5.5 billion. The profit on the preferred stock was estimated at $1.8 billion, and exercising the warrants earned more than $2 billion. Buffett defended Lloyd Blankfein's decisions as Goldman's CEO during the crisis.

  In October 2008, Berkshire also invested $6.5 billion in the Wrigley Company to help finance its purchase by Mars Inc. It sold its remaining bonds and preferred stock to Mars in 2016.

  On the 26th of August 2011, Berkshire bought $5 billion of Bank of America preferred shares. They paid 6%, or $300 million a year. The warrants allowed Berkshire to buy 700 million common shares at $7.14 each, and they were exercised. By 2017, the position had earned a profit of about $12 billion, not counting the annual interest.

  In 2019, Berkshire provided $10 billion in financing to Occidental Petroleum through warrants and preferred stock, helping it buy Anadarko Petroleum. From 2022, Berkshire began buying Occidental common shares.

  Apple became a different kind of bet. In the first quarter of 2016, Berkshire bought 9.8 million shares worth $1 billion. By the end of 2017, it owned 166 million shares, or 3.3% of Apple. Buffett said that Apple's ecosystem and brand loyalty give it an economic moat, and that iPhone buyers seem insensitive to price. He also said he understands consumer products businesses, which is how he sees Apple. In the second quarter of 2024, Berkshire sold $75.5 billion of Apple stock, lifting its cash reserves to a record $276.9 billion.

  Buffett had once called airlines a "deathtrap for investors," and a 1989 investment in US Airways almost lost Berkshire a substantial sum. Even so, in the third quarter of 2016 Berkshire surprised investors with large stakes in the major US airlines. By 2017, it was the largest shareholder in United Airlines and Delta Air Lines. Buffett described it as a "call on the industry" rather than a choice of one company. In April 2020, Berkshire sold all its airline shares because of the COVID-19 pandemic.

  There were also misses. Buffett turned down Amazon.com in 1994 because he could not predict its growth and it was losing money. Berkshire bought Amazon shares in 2019, a position then worth $2 billion. On Tesco, Berkshire took an after-tax loss of $444 million. Buffett called his early 2008 increase in ConocoPhillips "a major mistake" as oil prices collapsed. At the annual meeting on the 4th of May 2024, he said he had sold all of his Paramount shares at a substantial loss and blamed himself for investing.

  Abroad, between September 2019 and August 2020 Berkshire bought more than 5% of each of Japan's five largest trading houses: Itochu, Mitsubishi, Mitsui, Sumitomo and Marubeni. By April 2023, it had raised each stake to 7.4%.

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• 7. Rules and Share Price

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  Between 1965 and 2023, Berkshire's shareholder returns grew at a compound annual rate of 19.8%, against 10.2% for the S&P 500. In that stretch, the stock price fell in only eleven years.

  Buffett's stated rules are plain. He prefers evergreen businesses that produce predictable long-term returns. He does not invest in companies he does not understand, and he dislikes companies that may undergo significant change. Berkshire has generally avoided high-tech firms and missed an early chance to invest in Microsoft, despite a relationship with its founder. It also usually avoids real property, citing precise pricing, a lack of competitive advantage, complex management and corporate tax disadvantages.

  The share price follows from another rule. Berkshire has never split its Class A shares, because management wants long-term investors rather than short-term speculators. In 1996, it created Class B shares at a fraction of the price and voting rights of the originals. Holders of Class A stock can convert to Class B, but not the reverse.

  Buffett was reluctant to create the Class B shares at all. He did so to thwart unit investment trusts that would have marketed themselves as Berkshire look-alikes. In January 2010, as part of the BNSF Railway acquisition, Berkshire completed a 50-to-1 split of its Class B shares. The extra market liquidity led to the company's inclusion in the S&P 500.

  The climb of the Class A price is recorded in a handful of closing milestones. Shares first closed over $1,000 on the 26th of August 1983 and over $10,000 on the 16th of October 1992. They passed $100,000 on the 23rd of October 2006 and $200,000 on the 14th of August 2014. They first closed over $500,000 on the 16th of March 2022.

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• 8. Woodstock for Capitalists

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  The CHI Health Center Omaha fills with generally more than 40,000 people each year for Berkshire's annual shareholders' meeting. Fans nickname it "Woodstock for Capitalists." The meeting lasts 6 to 8 hours while Buffett, Greg Abel and Ajit Jain answer questions from shareholders. Buffett's letters to shareholders are also published every year.

  The meetings start with a cartoon made for the occasion. The 2004 cartoon starred Arnold Schwarzenegger as "The Warrenator," who travels through time to stop an attempt by Buffett and Charlie Munger to save the world from a "mega" corporation. In 2008, Munger became President of the United States and promoted eating at Dairy Queen. The 2016 cartoon spoofed the 1983 film Trading Places, with the GEICO gecko conspiring to manipulate cocoa bean prices to affect See's Candy.

  The pay at the top is modest. Buffett's salary is $100,000 a year with no stock options, among the lowest for CEOs of large American companies. It has not changed in 35 years. He also receives about $300,000 a year in home security services. Abel and Jain each earn $20 million a year, with a possible $3 million bonus at Buffett's discretion.

  People around Buffett have shaped the company. Charlie Munger served as vice chairman from 1978 until his death on the 28th of November 2023. David L. Sokol, a top lieutenant paid $24 million a year, resigned in 2011 after it emerged that he personally made a $3 million profit from Berkshire's purchase of Lubrizol. Todd Combs, then 39, joined as an investment manager in October 2010, and Ted Weschler, then 50, joined in early 2012.

  In January 2018, Abel became vice chairman for non-insurance operations and Jain became vice chairman for insurance operations. In May 2021, Buffett named Abel as his successor. In May 2025, Buffett announced he would retire as CEO, and Abel took over on the 1st of January 2026. Buffett personally owns 38.4% of the Class A voting shares, which is a 15.1% overall economic interest. His daughter Susan Alice Buffett and his son Howard Graham Buffett sit on the board.

  The first big purchases of the new era were already in motion. Berkshire bought OxyChem from Occidental Petroleum for $9.7 billion in cash in January 2026. In May 2026, it agreed to buy the home builder Taylor Morrison for $6.8 billion in cash, a deal expected to close in the second half of 2026.

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