In the world of investing, a long-term horizon tends to pay off, especially for value and growth investors. Warren Buffett is one such example. He is also known as "The Oracle of Omaha": one of the most successful investors of all time.
His investment journey started at a very young age, when he had a passion for buying companies that had been neglected by the market. He believed that he could find value in these companies - a strategy that he referred to as the "cigar butt strategy." He later took over Berkshire Hathaway in his 30s.
Berkshire Hathaway was originally a textile business, but it changed into an investment holding company after being taken over by Warren Buffett in the 1960s. The company is best known for its investment prowess.
Berkshire Hathaway is one of the most successful investment companies in the world. The company's stock price has outperformed the S&P 500 index by a significant margin over the long term. This is largely due to the investment acumen of Warren Buffett, Berkshire's chairman and CEO. Buffett is known for his disciplined investment approach and his ability to identify undervalued businesses. It has several investments in a wide range of industries, including technology, finance, insurance, energy, transportation, and manufacturing.
Some of the largest holdings in Berkshire's portfolio include Apple, Bank of America Corp, American Express Co, and Coca-Cola.
Disclaimer: The holdings may not be limited to the logos on the image and may change. The use of logos is for educational purposes only.
Berkshire's investment strategy is to focus on long-term value investing. The company looks for businesses that are well-managed, have strong competitive positions, and are trading at attractive valuations. Berkshire also has a strong preference for businesses that generate a lot of cash flow, which can be used to fund future growth or repurchase shares.
The investment portfolio of the company constantly changes, as the company buys and sells shares of stock and acquires or divests itself of businesses. It is reported to have shares in more than 60 listed and unlisted companies.
Financials, dividends, and share buybacks
Shareholder equity increased by $67.6 billion since December 2022, to $539.9 billion by June 30, 2023. Net earnings attributable to shareholders in the same period was $71.4 billion.
“During the first six months of 2023, we paid cash of $7.4 billion to acquire equity securities and we received proceeds of $25.8 billion from sales of equity securities… investment gains and losses from changes in the market prices of our investments in equity securities will produce significant volatility in our earnings”. View full results here.
The company may not have been paying dividends, but it has a track record of repurchasing stock (share buyback). Berkshire's stock repurchase program allows the company to repurchase its shares at prices below the company's intrinsic value, as determined by Warren Buffett and Charlie Munger, the vice chairman of the board. This program does not specify how many shares will be bought back, and it is expected to continue indefinitely.
Acquisitions
In January 2023, the company bought an additional 41.4% stake in Pilot Travel Centers, adding to the 38.6% that it already owned. The deal was valued at $8.2 billion. The company management said:
“Our long-held acquisition strategy is to acquire businesses that have consistent earning power, good returns on equity, and able and honest management. Financial results attributable to business acquisitions are included in our Consolidated Financial Statements beginning on their respective acquisition dates.”
Berkshire Hathaway also started buying shares in D.R. Horton (DHI), Lennar (LEN), and NVR (NVR) during the second quarter of 2023. Combined, these purchases totaled $814 million.
Earnings
Berkshire Hathaway is expected to release its third-quarter results in November 2023.
