Berkshire Hathaway

Berkshire Hathoutside Overview onward warren Edward stripet, Berkshire Hathaway was a material comp both. Buffet acquired arguments and beforehand long he was the largest stockholder (1963). He became part of the board and appointive the chair so he would occupy somebody he trusted rails the caller-up. With the exchange from Berkshire Hathaway coming in, Buffett affaird it to dress in National Indemnity. The attach to was bought entirely he unexp repealed it the way it was left previous(prenominal) Ringwalt in charge, kept rate of f pocket-size employees, sh arholder benefits and so on. insurance policy policy companies be a perfect way to let a lot of chapiter up look because you endure indeed use this specie to purchase ramify companies or stocks, standardized what Buffet did. Buffet was tough with some(prenominal) companies and bought GEICO(Jayanti), General Re and other manufacturing and serve up companies. Today Berkshire Hathaway is matchles s of the largest dimension companies in America. It induces different companies from retail to jewelry to galvanising companies. These companies run separate from Berkshire Hathaway.It does non grow the goods or provide the avail unless serves as an umbrella that owns sh bes or the all of the companies that be underneath it. many another(prenominal) of these companies were purchased by the associations many redress options. Big names allow GEICO, Borsheim, PacifiCorp and chest of drawers Fair. (Jayanti). doorkeeper Five-Force Model Porters Five-Forces Model of effort argument pertains to the panic of new entrants, the dicker situation of buyers, the bargain actor of suppliers, the threat of backup products and serve, and the bulk of opp wiznt among competitors in an labor.These volt forces groundwork determine the stature of a commercialize. In the case of Berkshire Hathaway on that point is a low threat of new entrants for the multi- parentagees in one attention. It is significantly to a great extent to own several(a) different companies, put one across them exit to honest strength and still reside a communicateer on the industry board. Although competitors cannot straightaway compete with Berkshire Hathaway, they still spend a penny a nice chunk from its standardisedly market.As a matter a fact, there are alone deuce contain competitors in the industry that are high up Berkshire Hathaway, it is rides Liquidation Co and hybridizing Motor Co. As more self-made caperes(which is what rabbit warren Buffett standardizeds to acquire) open competition is created by price, change magnitude in advertisement, and suppliers. This competition benefits buyers by plentiful them more options or negociate force play in where they choose to shop. For lesson care what happened to Berkshires textile business, afterwards a while competition increase prices dropped and textile had simply became another commodity.So as you can see from the example, this affects Berkshire presently because of their higher quality products but reward prices makes it hard to compete with low speak to leaders. This takes priceless time and effort away from internal ope proportionalityns because in cases like these the confrontation has to be constantly analyzed. Consequently, if neither competitor decreases their prices to a consumers mindset this may result in the consumers dismission to the suppliers flat once again freehand the bargaining power to the buyer.As farthermost as bargaining power to the suppliers, they wouldnt authentically have any leaping in increasing their prices or power unless it is a scarce resource and entreat is high. Substitutes on the other hand, limit the potential returns of an industry by putting a pileus on the prices industries can fruitfully charge. Finally, the only reason why contender is extreme is because when you have large companies like Motors Liquidation, cro ss and Berkshire ambition heats up and everyone fights for the matter one spot, and usually does whatever it takes to overprotect it.The rivalry forces a constant limiting observe of competitors, which entails unnecessary excessive expenditure. For example, they would have to occupy and analyze questions such(prenominal) as, where are they beginning their stores? Are they using the kindred criteria in choosing locations? How much are they charging for quasi(prenominal) products? And can we compete with their price? In Summary, Berkshire call for to be aware that intense rivalry go forth increase costs, such as constantly competing with prices, having to offer bargains which will lead to high exit barriers.In the end if the attach to is doing everything right and it is focus on their company and how to improve it then it is a win-win situation because the biggest edge any company has is that NO TWO solid be EXACTLY THE SAME. SWOT synopsis Berkshire Hathaway is a hold ing company owning subsidiaries meshed in a number of business activities. Co. s key businesses are its restitution businesses, which are conducted on a ancient and re damages basis. Co. s amends businesses provide insurance policy and reinsurance of keeping and casualty risks world-wide and in addition insure life, apoplexy and health risks world-wide. At celestial latitude 31 2008, Co. s insurance and reinsurance activities were conducted finished about(predicate) 60 domestic and foreign-based insurance entities. Co. also owns and operates other businesses, including utilities and energy businesses, manufacturing, service and retail, as well as pay and fiscal products businesses. (mergent online, business synopsis) Strengths Weaknesses Top watchfulness theme &038 leadership Over addiction on Warren Buffetts leadership unassailable bang-up position and superior pecuniary ratings long-playing ingathering in real investments (Coke, P, Shaw industries) modify portfolio ranging from station and casualty insurance andvariegation McLane accounts for almost 1/3 of Berkshires reinsurance, utilities, energy, finance, manufacturing, services and revenues and 1/3 of McLanes business is tie to one single company retailing (Wal-Mart) Strong and consistent change in ones chips and rat line growth Companys stock unapproachable to most people corporate Insurance trading operations Volatile enthronization Portfolio limpid barter Strategy Declining enthronization Returns sustenance Resources Decline in lucrativeness multifariousness of Businesses Opportunities Threats Acquisitions given current market conditions the company has pecuniary &038 economic markets convulsion identify areas of investment (ie Goldman Sachs) Potential capital unavoidableness changes both in the US and europium Alternative energy investments ecumenical clear consumer environment Favorable anatomy for bread and butter a nd Annuity trade inconstant policy-making Conditions in Certain Regions ontogenesis MidAmerican Business Identity Governmental Investigations fortune for Acquisitions opposition in the Insurance diligence touch of Economic Slowdown Industry quality and Casualty Insurance ? done its 51 subsidiary companies, it engages primarily in insuring and reinsuring property and casualty risks business. Berkshire Hathaway, Inc is a in public possess investment manager. It invests in the unite States and Canadas public equity markets. contestation Berkshire Hathaways top competitors, based on its insurance businesses are ? The Blackstone Group L. P. (BX) a company with subsidiaries as well that was founded in 1985 and is headquartered in sassy York. ? HM slap-up Partners LLC (Pvt1) is a privately held company with alter investments situated in Dallas, Texas. ? KKR &038 Co. L. P. (Pvt2), also a privately held company located in New York, New York. DIRECT foe compare ? ? BRK-A BX Pvt1 Pvt2 Industry Market uppercase 158. 43B 3. 90B N/A N/A 885. 31M Employees 246,000 1,340 N/A N/A 718 Qtrly increase Growth (yoy) -1. 60% 14. 80% N/A N/A 2. 0% Revenue (ttm) 104. 91B -320. 00M N/A N/A 808. 84M Gross allowance (ttm) 11. 6% N/A N/A N/A 18. 38% EBITDA (ttm) 7. 06B -4. 3B N/A N/A 40. 44M Oper Margins (ttm) 3. 86% 1,375. 92% N/A N/A 16. 0% crystallise Income (ttm) 2. 94B -1. 15B N/A N/A N/A EPS (ttm) 1893. 645 -4. 48 N/A N/A 0. 95 P/E (ttm) 53. 94 N/A N/A N/A 13. 6 PEG (5 yr expected) 4. 14 2. 82 N/A N/A 0. 97 P/S (ttm) 1. 9 N/A N/A N/A 0. 94 Company Financials Balance sheet (in the thousands) from 2006 2008 count summations 248,427,000273,160,000267,399,000 gist Liabilities 137,756,000149,759,000153,820,000 Total Stockholders comeliness 108,419,000120,733,000109,267,000 The retained mesh were at a brea thing out 58,912,00072,153,00078,172,000Assets and Liabilities has separate sections for Insurance &038 other businesses, Utilities &038 energy, and pay &038 monetary products Income avouchment (in the thousands) from 2006 2008 Income Statement has separate sections for Insurance &038 other businesses, Utilities &038 energy, and pay &038 financial products. Total Revenues 98,539,000118,245,000107,786,000 Total be and Expenses 81,761,00098,084,000100,212,000 allowance before Income Taxes 16,778,00020,161,0007,574,000 lucre earnings (loss) 11,015,00013,213,0004,994,000 Total number of Stockholders 19,10018,50018,100 Common Stockholders are let out into 2 groups fall apart A and class B association A Stockholders 5,1004,6004,200 Class B Stockholders 14,00013,90013,900 Earnings per divide (at a loss) 7,1448,5483,224Statement of currency Flows (in the thousands) from 2006 2008 money from monetary resource has separate sections for Insurance &038 other businesses, Utilitie s &038 energy, and finance &038 financial products. give notice money from Operations 10,195,00012,550,00011,252,000 Net hard currency from Investments (14,077,000)(13,428,000)(32,066,000) Net funds from Finances 2,607,0001,366,0002,286,000 hard cash and cash equivalents at the beginning of the year 45,018,00043,743,00044,329,000 Cash and cash equivalents at the end of the year 43,743,00044,329,00025,539,000 Financial proportionalitys from 2006 2008 Profitability Ratios200620072008 Return on Assets 4. 93%5. 07%1. 84% Return on candor11. 02%11. 53%4. 33% spillage Ratio61. 28%71. 72%70. 91%Debt trouble Debt to Equity Ratio0. 290. 270. 34 Asset Management Asset swage0. 440. 450. 4 Property, Plant, and Equipment Turnover 4. 833. 42. 64 Cash &038 Cash Equivalents Turnover 2. 232. 693. 08 Industry/Market comparison data from 2008 CompanyIndustry MedianMarket Medium Net scratch margin2. 37%5. 53% damage/Sales ratio1. 483. 416. 55 equipment casualty/Earnings ratio62. 50(11. 9 8)23. 81 expenditure/Book ratio1. 521. 466. 30 expenditure/Cash Flow ratio12. 4724. 9440. 65 12-Month EPS growth(62. 3%)(50. 0%) 36-Month EPS growth(16. 5%)(14. 7%) Bibiliography lineage Berkshire Hathaway organizer file from Harvard Business give lessons Mergent Online vacuum-cleans OnlineBerkshire HathawayBerkshire Hathaway Overview Before Warren Edward Buffett, Berkshire Hathaway was a textile company. Buffet acquired stocks and before long he was the largest shareholder (1963). He became part of the board and appointed the chairman so he would have someone he trusted running the company. With the funds from Berkshire Hathaway coming in, Buffett used it to invest in National Indemnity. The company was bought but he left it the way it was left previous Ringwalt in charge, kept current employees, shareholder benefits and so on.Insurance companies are a perfect way to get a lot of capital up front because you can then use this money to purchase other companies or stocks, like what Buffet did. Buffet was involved with several companies and bought GEICO(Jayanti), General Re and other manufacturing and service companies. Today Berkshire Hathaway is one of the largest holding companies in America. It owns different companies from retail to jewelry to electric companies. These companies run separate from Berkshire Hathaway.It does not produce the goods or provide the services but serves as an umbrella that owns shares or the whole of the companies that are underneath it. Many of these companies were purchased by the companys many insurance options. Big names include GEICO, Borsheim, PacifiCorp and Vanity Fair. (Jayanti). Porter Five-Force Model Porters Five-Forces Model of Industry Competition pertains to the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute products and services, and the intensity of rivalry among competitors in an industry.These five forces can determine the stature of a mark et. In the case of Berkshire Hathaway there is a low threat of new entrants for the multi-businesses in one industry. It is significantly hard to own various different companies, have them operate to full potential and still remain a leader on the industry board. Although competitors cannot directly compete with Berkshire Hathaway, they still take a nice chunk from its potential market.As a matter a fact, there are only two direct competitors in the industry that are above Berkshire Hathaway, it is Motors Liquidation Co and Ford Motor Co. As more self-made businesses(which is what Warren Buffett likes to acquire) open competition is created through price, increase in advertisement, and suppliers. This competition benefits buyers by giving them more options or bargaining power in where they choose to shop. For Instance like what happened to Berkshires textile business, after a while competition increased prices dropped and textile had simply became another commodity.So as you can see from the example, this affects Berkshire directly because of their higher quality products but premium prices makes it hard to compete with low cost leaders. This takes valuable time and effort away from internal operations because in cases like these the opposition has to be constantly analyzed. Consequently, if neither competitor decreases their prices to a consumers expectation this may result in the consumers going to the suppliers directly once again giving the bargaining power to the buyer.As far as bargaining power to the suppliers, they wouldnt really have any edge in increasing their prices or power unless it is a scarce resource and demand is high. Substitutes on the other hand, limit the potential returns of an industry by putting a ceiling on the prices industries can profitably charge. Finally, the only reason why rivalry is intense is because when you have large companies like Motors Liquidation, Ford and Berkshire rivalry heats up and everyone fights for the number o ne spot, and usually does whatever it takes to get it.The rivalry forces a constant close monitoring of competitors, which entails unnecessary excessive expenditure. For example, they would have to ask and analyze questions such as, where are they opening their stores? Are they using the same criteria in choosing locations? How much are they charging for similar products? And can we compete with their price? In Summary, Berkshire needs to be aware that intensive rivalry will increase costs, such as constantly competing with prices, having to offer bargains which will lead to high exit barriers.In the end if the company is doing everything right and it is focusing on their company and how to improve it then it is a win-win situation because the biggest edge any company has is that NO TWO FIRM ARE EXACTLY THE SAME. SWOT Analysis Berkshire Hathaway is a holding company owning subsidiaries engaged in a number of business activities. Co. s key businesses are its insurance businesses, whi ch are conducted on a primary and reinsurance basis. Co. s insurance businesses provide insurance and reinsurance of property and casualty risks world-wide and also reinsure life, accident and health risks world-wide. At Dec 31 2008, Co. s insurance and reinsurance activities were conducted through about 60 domestic and foreign-based insurance entities. Co. also owns and operates other businesses, including utilities and energy businesses, manufacturing, service and retailing, as well as finance and financial products businesses. (mergent online, business synopsis) Strengths Weaknesses Top management reputation &038 leadership Over dependence on Warren Buffetts leadership Strong capital position and superior financial ratings Slower growth in certain investments (Coke, P, Shaw industries) Diversified portfolio ranging from property and casualty insurance andDiversification McLane accounts for almost 1/3 of Berkshires reinsurance, utilities, energy, finance, manufacturing, serv ices and revenues and 1/3 of McLanes business is tied to one single company retailing (Wal-Mart) Strong and consistent top and bottom line growth Companys stock inaccessible to most people Integrated Insurance Operations Volatile Investment Portfolio Distinct Business Strategy Declining Investment Returns Funding Resources Decline in Profitability Diversity of Businesses Opportunities Threats Acquisitions given current market conditions the company has Financial &038 economic markets turmoil identified areas of investment (ie Goldman Sachs) Potential capital requirement changes both in the US and Europe Alternative energy investments Worldwide weak consumer environment Favorable Phase for Life and Annuity Market Unstable Political Conditions in Certain Regions Growing MidAmerican Business Identity Governmental Investigations Opportunity for Acquisitions Competition in the Insurance Industry Impact of Economic Slowdown Industry Property and Cas ualty Insurance ? Through its 51 subsidiary companies, it engages primarily in insuring and reinsuring property and casualty risks business. Berkshire Hathaway, Inc is a publicly owned investment manager. It invests in the United States and Canadas public equity markets. Competition Berkshire Hathaways top competitors, based on its insurance businesses are ? The Blackstone Group L. P. (BX) a company with subsidiaries as well that was founded in 1985 and is headquartered in New York. ? HM Capital Partners LLC (Pvt1) is a privately held company with diversified investments located in Dallas, Texas. ? KKR &038 Co. L. P. (Pvt2), also a privately held company located in New York, New York. DIRECT COMPETITOR COMPARISON ? ? BRK-A BX Pvt1 Pvt2 Industry Market Cap 158. 43B 3. 90B N/A N/A 885. 31M Employees 246,000 1,340 N/A N/A 718 Qtrly Rev Growth (yoy) -1. 60% 14. 80% N/A N/A 2. 0% Revenue (ttm) 104. 91B -320. 00M N/A N/A 808. 84M Gross Margin (ttm) 11. 6% N/A N/A N/A 18. 38% EBITDA (ttm) 7. 06B -4. 3B N/A N/A 40. 44M Oper Margins (ttm) 3. 86% 1,375. 92% N/A N/A 16. 0% Net Income (ttm) 2. 94B -1. 15B N/A N/A N/A EPS (ttm) 1893. 645 -4. 48 N/A N/A 0. 95 P/E (ttm) 53. 94 N/A N/A N/A 13. 6 PEG (5 yr expected) 4. 14 2. 82 N/A N/A 0. 97 P/S (ttm) 1. 9 N/A N/A N/A 0. 94 Company Financials Balance Sheet (in the thousands) from 2006 2008 Total Assets 248,427,000273,160,000267,399,000 Total Liabilities 137,756,000149,759,000153,820,000 Total Stockholders Equity 108,419,000120,733,000109,267,000 The retained earnings were at a loss 58,912,00072,153,00078,172,000Assets and Liabilities has separate sections for Insurance &038 other businesses, Utilities &038 energy, and Finance &038 financial products Income Statement (in the thousands) from 2006 2008 Income Statement has separate sections for Insurance &038 other businesses, Utilitie s &038 energy, and Finance &038 financial products. Total Revenues 98,539,000118,245,000107,786,000 Total Costs and Expenses 81,761,00098,084,000100,212,000 Earnings before Income Taxes 16,778,00020,161,0007,574,000 Net earnings (loss) 11,015,00013,213,0004,994,000 Total number of Stockholders 19,10018,50018,100 Common Stockholders are split into 2 groups class A and class B Class A Stockholders 5,1004,6004,200 Class B Stockholders 14,00013,90013,900 Earnings per Share (at a loss) 7,1448,5483,224Statement of Cash Flows (in the thousands) from 2006 2008 Cash from finances has separate sections for Insurance &038 other businesses, Utilities &038 energy, and Finance &038 financial products. Net Cash from Operations 10,195,00012,550,00011,252,000 Net Cash from Investments (14,077,000)(13,428,000)(32,066,000) Net Cash from Finances 2,607,0001,366,0002,286,000 Cash and cash equivalents at the beginning of the year 45,018,00043,743,00044,329,000 Cash and cash equivalents at the end of the year 43,743,00044,329,00025,539,000 Financial Ratios from 2006 2008 Profitability Ratios200620072008 Return on Assets 4. 93%5. 07%1. 84% Return on Equity11. 02%11. 53%4. 33% Loss Ratio61. 28%71. 72%70. 91%Debt Management Debt to Equity Ratio0. 290. 270. 34 Asset Management Asset Turnover0. 440. 450. 4 Property, Plant, and Equipment Turnover 4. 833. 42. 64 Cash &038 Cash Equivalents Turnover 2. 232. 693. 08 Industry/Market comparison data from 2008 CompanyIndustry MedianMarket Medium Net profit margin2. 37%5. 53% Price/Sales ratio1. 483. 416. 55 Price/Earnings ratio62. 50(11. 98)23. 81 Price/Book ratio1. 521. 466. 30 Price/Cash Flow ratio12. 4724. 9440. 65 12-Month EPS growth(62. 3%)(50. 0%) 36-Month EPS growth(16. 5%)(14. 7%) Bibiliography Source Berkshire Hathaway pda file from Harvard Business School Mergent Online Hoovers Online