7 things you need to know about Berkshire Hathaway

When I run across a company I might be interested in as an investment — one that I know next to nothing about — I typically start my investigation by just jumping in and taking a quick look around. And that’s how I’ve designed this “7 Things You Need to Know” series: a quick scan of the facts, in no particular order, that gives you, the potential investor, a mix of high- and low-level takeaways.

Berkshire Hathaway (NYSE: BRK-B)? Of course I’ve heard of it. There probably aren’t that many investors who haven’t at least heard of it, but I’ll be the first to admit that beyond a few basics, I know very little about the business. So here’s my first serious look at this famous, if not completely straightforward, company.

1. Berkshire has two share classes
As I write this, the price for a single share of BRK-A is US$174,934. Yes, almost US$180,000 per share. At the time of writing, those shares are up 1.36%, or US$2,345 per share. The average trading volume for BRK-A shares is 51,242.

As is obvious from that low trading volume, most investors will never buy these shares — which cut you into a larger share of Berkshire’s profits — and will instead buy BRK-B shares, which are going for US$116 at time of writing, with a more recognisable average trading volume of 3.9 million shares.

2. Berkshire is a “publicly owned investment manager”
What does this mean? When you invest in Berkshire, in either share class, you’re buying into the performance of the company’s common stock holdings as well as its wholly owned subsidiaries. These common stock holdings include such corporate stalwarts as American ExpressCoca-ColaJohnson & Johnson, and Visa.

The wholly owned subsidiaries famously include GEICO Auto Insurance, NetJets, and See’s Candies.  Among other things, earnings generated from these wholly owned companies are used to buy other companies, with which to generate more earnings for Berkshire, or to buy more common stock, with the same purpose in mind.

3. Blistering stock performance
Berkshire CEO and COB Warren Buffett isn’t the famous investor he is for nothing. Since BRK-B shares began trading in 1996, total shareholder return is 463.1%. Shares in financials sector investor-darling Bank of America (NYSE: BAC) have been trading since 1986, and have returned 92.72% to investors.

4. Berkshire had a great first quarter
For the first quarter of this year, Berkshire grew its revenue by 15% year over year, and its earnings by 50.8%. Trying to get closer to an apples-to-apples comparison to Berkshire, fellow publicly owned investment manager BlackRock (NYSE: BLK) grew its year-over-year first-quarter revenue by 8.9% and its earnings by 10.5%.

5. Warren Buffett makes less money than you think
Last year, Buffett was paid just US$423,000 from Berkshire Hathaway for his dual roles of CEO and chairman. Goldman Sachs (NYSE: GS) CEO Lloyd Blankfein made more than US$8 million last year. Jamie Dimon, in an off-year for the CEO and COB of JPMorgan Chase (NYSE: JPM), made just US$1.67 million.

The low-profile of Buffett’s modest take-home pay is a refreshing change in this age of high-profile, high-paid, and sometimes low-performing corporate chiefs.

6. Berkshire directors “eat their own cooking”
Most of Berkshire’s directors have a major portion of their own net worth invested in the company. Buffett’s longtime managing partner Charlie Munger has 80% or more of his personal net worth tied up in Berkshire shares. Buffett’s portion is 98%. Now that’sconfidence in your company’s product.

7. A solid return on equity
Trailing 12 months, Berkshire’s ROE is 8.87%. That’s not JPMorgan’s 11.55%, Wells Fargo‘s (NYSE: WFC) 13.07%, or even BlackRock‘s 9.87%, but when you consider the range of wholly owned companies Berkshire manages, along with the array of common-stock holdings it has to monitor, 9.87% is very good.

Even big banks like JPMorgan and Wells, which engage in such varied kinds of banking business, don’t face the same sort of operational and managerial challenges Berkshire does.

Foolish bottom line
When you invest in Berkshire Hathaway, you’re investing in the investing decisions of Warren Buffett and Charlie Munger. Buffett and Munger rarely disappoint, and they put their own money where their mouths are. Performance and personal commitment: What more could you ask for from an investment?

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

Perpetual vs Magellan
Are troubles coming for the banks?

A version of this article, written by John Grgurich, originally appeared on

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…


The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!