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Submitted To-M/s Kavita Kulkarni Submitted By Gaurav Madaan 80303120026

Berkshire Hathway

INC.

Overview
Berkshire Hathway Inc. is an American conglomerate and has its headquarters in Omaha, Nebraska, Untied States. It has got a large number of subsidiary companies. In last 44 years the average growth in shareholders equity is 20.3%. From 2000-2010 the company produced a total return of 76%. The company is very well known for the control by Warren Buffet, who is the company chairman and CEO. Earlier Mr Buffet used to focus on long term investments in public quoted stocks, but now he has started buying whole companies. Berkshire as a conglomerate holds a number of businesses including confectionery, retail, railroad, home furnishings, and encyclopaedias, manufacturers of vacuum cleaners, jewellery sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.

History
The company started with a textile plant established by Oliver Chase in 1839 as the Valley Falls Company. Chase founded his textile mill in 1806. In 1929 the Valley Falls Company merged with the Berkshire Cotton Manufacturing Company established in 1889. The combined company was known as Berkshire Fine Spinning Associates. In 1955 Berkshire Fine Spinning Associates merged with Hathway Manufacturing Company. In 1962 Warren Buffet started buying shares in Berkshire Hathway. Eventually Buffet acknowledged that the textile business was going down and it will not improve.
Stanton made a verbal tender offer of $1112 per share for the company to buy back Buffett's shares. Buffett agreed to the deal. A few weeks later, Warren Buffett received the tender

offer in writing, but the tender offer was for only $1138. Buffett later admitted that this lower, undercutting offer made him angry. Instead of selling at the slightly lower price, Buffett decided to buy more of the stock to take control of the company and fire Stanton. In 2010, Buffett claimed that purchasing Berkshire Hathaway was the biggest investment mistake he had ever made, and claimed that it had denied him compounded investment returns of about $200 billion over the previous 45 years. Buffett claimed that had he invested that money directly in insurance businesses instead of buying out Berkshire Hathaway, those investments would have paid off several hundredfold. Buffet in his early years was handling the main business of the company, but by 1967 he was expanding into the insurance industry and other businesses.

Berkshire Hathway

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Product Mix

Insurance Group: The organization takes part in both insurances and reinsurances regarding property and casualty risk. It also includes life, health and accident reinsurances. It maintains capital strengths at an exceptionally high level. This is their competitive advantage. All of Berkshires major insurance subsidiaries are rated AAA by Standard & Poors Corporation.

GEICO: It was acquired by Berkshire in 1996. It is headquartered in Maryland. Government Employees Insurance Company, GEICO General Insurance Company, GEICO Indemnity Company, and GEICO Casualty Company are its major subsidiaries. These companies are operational in 50 states and offers primarily private passenger automobile insurance. The subsidiaries market their policies primarily through direct response methods, in which applications for insurance are submitted directly to the companies by telephone, through the mail, or via the Internet.

GENERAL RE: It was acquired by Berkshire in 1998. Currently they conduct global reinsurance business in 72 cities. North American property/casualty, international properties are the major segments it operates in. General Re is one of the largest reinsurers in the world based on net premiums written and capital.

BERKSHIRE HATHWAY ASSURANCE: Berkshire created a government bond insurance company to insure municipal and state bonds. These type bonds are issued by local governments to finance public works projects such as schools, hospitals, roads, and sewer systems. Few companies are capable of competing in this area.

Utilities And Energy Group: Berkshire currently holds 83.7% (80.5% on a fully
diluted basis) of the MidAmerican Energy Holdings Company. At the time of purchase, Berkshire's voting interest was limited to 10% of the company's shares, but this restriction ended when the Public Utility Holding Company Act of 1935 was repealed in 2005. A major subsidiary of MidAmerican is CE Electric UK.

Clothing: Berkshires clothing businesses include manufacturers and distributors of a

variety of clothing and footwear. Businesses engaged in the manufacture and distribution of

Berkshire Hathway
clothing includes Union Underwear Corp. Fruit of the Loom, Garan, Fechheimer Brothers and Russell Corporation. Berkshires footwear businesses include H.H. Brown Shoe Group, Acme Boots, Brooks Sports and Justin Brands. Berkshire acquired Fruit of the Loom in 2002 for $835 million in cash. Fruit of the Loom, headquartered in Bowling Green, Kentucky, is a vertically integrated manufacturer of basic clothing.

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Building Products: With the acquisition of Acme Building

Brands, Berkshire entered the building brand business. Acme manufactures and distributes clay bricks, concrete block and cut limestone. It expanded its business when it acquired Benjamin Moore & Co. Moore formulates, manufactures and sells primarily architectural coatings that are available principally in the United States and Canada. In 2001, Berkshire acquired three additional building products companies. In February, it purchased Johns Manville which was established in 1858 and manufactures fibre glass wool insulation products for homes and commercial buildings, as well as pipe, duct and equipment insulation products. In July, Berkshire acquired a 90% equity interest in MiTek Inc., which makes engineered connector products, engineering software and services, and manufacturing machinery for the truss fabrication segment of the building components industry. Finally in 2001, Berkshire acquired 87 % of Dalton, Georgia-based Shaw Industries, Inc. Shaw is the worlds largest carpet manufacturer based on both revenue and volume of production and designs and manufactures over 3,000 styles of tufted and woven carpet and laminate flooring for residential and commercial use under approximately 30 brand and trade names and under certain private labels. In 2002, Berkshire acquired the remaining 12.7 % of Shaw. On August 7, 2003, Berkshire acquired Clayton Homes, Inc. Clayton, headquartered near Knoxville, Tennessee, is a vertically integrated manufactured housing company. At year-end 2004, Clayton operated 32 manufacturing plants in 12 states. Claytons homes are marketed in 48 states through a network of 1,540 retailers, 391 of which are company-owned sales centres. On May 1, 2008, Mitek acquired Hohmann & Barnard a fabricator of anchors and reinforcement systems for masonry and on October 3 of that year, Mitek acquired BlokLok, Ltd. of Toronto, Canada. On April 23, 2010, Mitek acquired the assets of Dur-O-Wal from Dayton Superior Corporation.

Flight Services: Berkshire entered flight services sector by acquiring Flight Safety
International Inc. FSI primarily engages in business of providing high technology training to operators of aircraft and ship. Berkshire also acquired NetJets Inc in 1998. In 2004 NetJets program operated 15 types of aircrafts.

Retail: Berkshire operates in retail sector through Nebraska Furniture Mart, R.C.Willey
Home Furnishings, Star Furniture Company and Jordans Furniture Inc. In 2000 Berkshire

Berkshire Hathway
purchased a chain of jewellery stores named Ben Bridge Jewellers followed by another acquisition named Helzbarg Diamonds.

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In 2002, Berkshire acquired The Pampered Chef, Ltd., largest direct seller of kitchen tools in the United States. Products are researched, designed and tested by The Pampered Chef, and manufactured by third party suppliers. In acquired many other retail companies to explore in this sector. Few being McLane Company, Albecca Inc, Maemon Holdings Inc and many more.

Finance and Financial Products: Berkshire acquired and storage trailers, chassis,
intermodal piggyback trailers and domestic containers. Clayton's finance business, (loans to manufactured home owners), earned $206 million down from $526 million in 2007. Loan losses remain 3.6% up from 2.9%. Berkshire Hathway is 5th largest company of the world and holds the government bonds too. It is known for investing in the companies and acquiring them.

Financial Highlights
Berkshire Hathway holds the largest share in entire NASDAQ. Its share price is 127489 $. It has two kinds of shares. BRK-A and BRK-B. Category A are large cap shares and category B are the small cap shares. One can convert category A shares into category B but not vice versa.
YEAR 2011 2010 2009 ASSETS 392647.00 372229.00 297119.00 PBT 15314.00 19051.00 11552.00 PAT 10746.00 13444.00 8014.00 TURNOVER 143688.00 136185.00 112493.00

Note All figures mentioned above are in dollars. The assets grew 25.72% in 2010 over 2009 and 5.2% in 2011 over 2010. So there is a diminishing growth in the assets. The PBT and PAT are following an up down pattern. Companys turnover has increased insignificantly over the last two years. Company is going at a smooth pace as of now

Berkshire Hathway

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Business Strategies
Warren Buffet is the largest investor of present era. He looks out for few things before investing in a company. Methodology: 1. Has the company performed consistently well? Basically what he looks for is ROE (return on equity). ROE tells about the rate at which shareholders are getting returns on their investments. He compares the ROE of different companies in the same sector and decides the companys performance. 2. Has the company avoided excess debt? Next big thing is debt. He observes that if the companys debt/equity ratio is low or high. A high ratio indicates more debt rather than equity is financing the business. A high level of debt compared to equity can result in volatile earnings and large interest expenses. 3. Are profit margins high? Are they increasing? The growth of a company does not depend on the profit margins but the growth of profit margins. He observes the data of previous 10 years and make out how well the company is performing. Keeping the data in mind he forecast the performance and invests. 4. How long has the company been public? Mr Buffet focuses on companies which are at least 10 years old. He makes longevity as a tool of evaluation. Buffet judge a company on the basis of how well the company has added value to the shareholder. It is a very difficult task as based on past performance it is very difficult to guess the future of a company because of market instability and other variable factors. 5. How unique is company with respect to its approach and products? He knows that competitive advantage is the most important part of business world. Red ocean companies are always successful. So he traces the companies analyse their strategies and then invest.

Warren Buffet never gives dividends to its shareholders. He says if someone gives dividends that mean he is not sure of company growth and just to sustain the shareholders the company gives dividends.

Berkshire Hathway

INC.

Recent Developments
Berkshire Hathaway Inc. has offered to buy Residential Capital LLC's mortgage unit, according to court papers filed Monday. Berkshire Hathaway Inc., Buffett's holding company, is seeking to replace Nation star Mortgage Holdings owned by Fortress Investment Group as the initial bidder for the bankrupt company's mortgage servicing unit. ResCap, the mortgage unit of Ally Financial Inc. filed for bankruptcy in May with a plan to sell the unit to Nation star for about $2.4 billion. Ally is the former in-house financing arm for General Motors Co previously known as GMAC, and is not in bankruptcy. Berkshire also offered to serve as the stalking-horse bidder for a portfolio of loans that ResCap had planned to sell to Ally for approximately $1.4 billion. The stalking-horse, or initial bidder, sets the minimum price, requiring other bidders at the auction to make higher counteroffers. In both cases, Berkshire said it would offer more attractive terms in papers filed in federal bankruptcy court in Manhattan. Berkshire also topped the proposed bid from Ally, offering $1.45 billion, or $50 million more. Before the bankruptcy filing, Berkshire made a last-minute offer to buy ResCap assets for $1 in return for taking on its liabilities. Ally turned down the offer. Spokeswomen for both Ally and ResCap declined to comment on the Berkshire filing. A spokesman for Fortress did not immediately return a request for comment after business hours Monday.

Bibliography 1. 2. 3. 4. Yahoo Finance Reuters.com Investopedia Wikipedia