Acquiring shares certainly works over time and is what we ordinary value investors should be focused on. But Berkshire went beyond this strategy - way beyond - to buy whole companies for its portfolio.
Why? Two reasons, mainly.
- If you own the whole company, you're entitled to its cash and cash flow and can reinvest it as you wish.
- You don't have to compete with other shareholders, and management and reporting relationships are simpler.
The insurance group has grown substantially and is anchored by consumer favourite GEICO, (originally bought by Ben Graham in the 1950s), and by General Re, in the lucrative reinsurance (wholesale insurance) market. The companies play in different insurance segments, and combine to produce $81 billion in revenue in 2006, with almost $13 billion in pretax income and an amazing $50 billion in "float" - cash taken in but not paid out on claims and used for investments.
Beyond insurance, the manufacturing, retail, and service group now consists of some 70 companies, large and small, all successful in their own arena.
An obvious favourite is Borsheim's, a chain of high-end jewelry stores. Dairy Queen, RC Willey Pampered Chef, and See's Candies are strong consumer names.
Applied Underwriters (worker's comp), NetJets (company jet leasing), FlightSafety International and MiTek, are for the business-to-business world.
Some companies are large and others are small, including the Nebraska Furniture Mart, which Buffett bought one morning as a $60 million birthday present to himself.
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