Berkshire Hathaway Inc

All-star are running the various operating businesses

Tuesday 25 October 2011, by Danthem, Wang Ting, Wang Yongqing, Yang Xiancun

6 inspired

a) The main facts about the activities of the company

Berkshire Hathaway Inc is a most famous company in the world; Warren Buffett is the company’s chairman and CEO. The company headquartered in Omaha, United States, and had a number of subsidiary companies. The last 44 years, the company averaged an annual growth in book value of 20.3% to its shareholders. According to the Forbes Global 2000 List, Berkshire Hathaway is the eighth largest public company in the world. The company has strict management system of ethics. If we want to know more about the ethics of Berkshire, we can easily download the file (CODE OF BUSINESS CONDUCT AND ETHICS) from the website.

The content of the Ethical Standards are as follows:

1. Conflicts of Interest
2. Corporate Opportunities
3. Fair Dealing.
4. Insider Trading.
5. Confidentiality.
6. Protection and Proper Use of Company Assets.
7. Compliance with Laws, Rules and Regulations
8. Timely and Truthful Public Disclosure.
9. Significant Accounting Deficiencies.

Berkshire has a diverse range of businesses including retail, railroad, home furnishings, and manufacturers of vacuum cleaners, jewelry sales; newspaper publishing; manufacture and distribution of uniforms; as well as several regional electric and gas utilities.

In 2006, Warren Buffett announced that he donate 83% of the wealth to do charity, contain 10 million Berkshire Hathaway Class B shares (worth approximately US$30.7 billion as of June 23, 2006). It is the largest charitable donation in history.

Main view for the first part:

1. According to the Forbes Global 2000 List, Berkshire Hathaway is the eighth largest public company in the world.
2. Berkshire now has a diverse range of businesses
3. Warren Buffett is the company’s chairman and CEO
4. Buffett made the largest charitable donation(Berkshire Hathaway Class B shares) in history in 2006.

b) The ethical challenges this company is addressing

Barron Magazine named Berkshire Hathaway the most respected in the world in 2007 based on a survey of American money managers. However now Warren Buffet has an age at 81, also his partnership, Berkshire Hathaway Vice president, Charlie Munger has an age at 87. Therefore, the company has the succession plans to find 3 to 4 investment managers. The ethical challenge questions are:
-  Will Warren buffet?s successors take into account the interests of shareholders to be the most important or not.

-  Without Warren Buffet, Would Berkshire Hathaway remain to be the ethical company.

c) What makes you believe this company is really ethical and why you trust it

As the primary shareholder, chairman and CEO of Berkshire Hathaway, Warren Buffett is not only one of the most successful investors in the world but also a great example on philanthropy. In June 2006, he gave away his 83% fortune (Worth approximately US$30.7 billion as of June 23, 2006) to the Bill & Melinda Gates Foundation. This is the largest charitable donation in history. In 2006, he auctioned his 2001 Lincoln Town Car on eBay to raise money for Girls, Inc. In 2007, he auctioned a luncheon with himself that raised a final bid of $650,100 for a charity. What he has done proved what he said: ?I don’t have a problem with guilt about money. The way I see it is that my money represents an enormous number of claim checks on society.? With such a great and ethical CEO, We believe Berkshire Hathaway will do better in future.

Berkshire Hathaway considers ethics one of the most important parts in company conduct and culture. The company?s code of business conduct and ethics requires that The Company is proud of the values with which it conducts business. It has and will continue to uphold the highest levels of business ethics and personal integrity in all types of transactions and interactions. The company makes profit by their hard working. They don?t compromise on ethics. The company has detailed principles about purpose, ethical standards, waivers, violations of ethical standards and compliance procedures to guide their actions.

While acknowledging company give generously to charitable organizations often from their financial backbone, many shareholders have felt disenfranchised. Charities chosen by company management would often not be the charity of choice of individual stockholders. Shareholders nominate which charity or charities should get a donation by numbers of shares they own. The company then allocates its charitable donations to the charities in the proportions voted on by shareholders. This approach has been welcomed by shareholders and over 90% of them reply to company?s requests for their donation.

Berkshire Hathaway?s incredible growth has spawned charity beyond Buffett’s. Most of the early investors seem much like Buffett—rich, but they content to live a modest and unpretentious lifestyle. Many of those investors have made charitable donations worth millions of dollars. Much more giving is to come as the investors leave behind their estates. Not only Berkshire Hathaway and its shareholders said but also Berkshire Hathaway and its shareholders have done make me sure that it is an ethical company.

d) The possible challenges facing the company in the future and how you think this company may improve

Although Berkshire Hathaway is already a famous and successful multinational conglomerate holding company, it also faces several challenges and risks.

-  The successor of Buffett:

People has been debated for years that the question that who will succeed Warren Buffett when the 81-year-old Oracle of Omaha retire from Berkshire Hathaway. Recently, we only know that maybe it would not just be one person. Because Buffett has maintained his roles of chairman, chief executive and divided the firm?s portfolio. It is widely anticipated that Buffett?s son Howard will take over his chairman role while Combs and Weschler (two best investment managers in Berkshire Hathaway) will be in charge of managing Berkshire?s portfolio.

-  The health of Berkshire Hathaway:‪

Berkshire Hathaway acquired Burlington Northern Santa Fe railroad operator in 2010. It is one of the biggest focuses and uncertainties that Buffett is likely to present to shareholders. Another question is that how much would be the big disaster like Japan earthquake affected Berkshire?s insurance and reinsurance operations, the revenue of which is over $100 billion.

-  Acquisitions:‪

Buffett in his annual shareholder letter in February signaled that Berkshire must buy more companies to keep growing at a decent slip. In the last two years, Berkshire has grown more slowly than the S&P500 has in its bull run. ?The job gets tougher as the numbers get larger,? Buffett wrote to the Berkshire faithful. ?We will need both good performance from our current businesses and more major acquisitions.?

The purchase of Burlington Northern Santa Fe in 2010 was Berkshire?s biggest ever acquisition, and Buffett said in February that his ?elephant gun has been reloaded.? Shortly after releasing those words, Buffett pulled the trigger on the $9 billion purchase of Lubrizol. Look for shareholders to press what would fit in Buffett?s range of $5 billion to $20 billion deals.

-  The economy:

Investors always wait anxiously for Buffett?s remarks on the economy of USA and every other country in the world. With concerns about global growth, a stuck housing market and European sovereign debt, his every word will be even more closely marked. But it is unfortunately that Standard & Poor’s cut its ratings outlook on Berkshire Hathaway from "stable" to "negative", after downgrading the credit rating of United States.

-  Sokol scandal:

Berkshire?s audit committee and Warren Buffett blamed Sokol himself for the scandal. But it still remains the question that to which extent, the Sokol scandal may hurt Berkshire Hathaway and Buffett?s reputation.

My suggestions to the improvement of Berkshire are as follow:

-  Do more successful M&A to boost its earnings.

-  Take more social responsibilities to keep and improve its reputation.

-  Expand more businesses in developing countries

Bibliography

http://www.berkshirehathaway.com/
http://en.wikipedia.org/wiki/Berkshire_Hathaway
http://finance.yahoo.com/
http://www.buffettsecrets.com/berkshire-hathaway-and-charity.htm
http://blogs.wsj.com/deals/2011/08/08/berkshire-other-insurers-get-negative-tag-from-sp/

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1 Discussion / 1 Message

  • Berkshire Hathaway Inc 27 February 2013 at 18:28 , by Sergi Bresco

    Without a doubt, the arrival of Warren Buffett to Berkshire Hathaway made that this company had a amazing annual growth (nearly 20% annual growth in Wall Street since its arrival), impacting of way very generous in the pockets of your shareholders. Warren Buffett revolutioned the company including, also of his textil business, a diverge range of business and a policy of acquiring companies (the base of your model business). But the most important contribution of Warren Bufett is your Ethicals Standards (fair dealing, protection and proper use of company assets...) that accompanying in the day by day of Berkshire Hathaway and, not less important, your charity contribution year by year.
    For this I think that Berkshire Hathaway is a company very inspiring and a example to follow for me: stay focused and feel a great devotion to your work, make others feel your ethical values and that implement them in day to day business. And if life has made you have large amounts of money, it is best to share it and help others.

    I would like to know that opinions you have about this company (about Warren Buffett, Berkshire Hathaway, your ethicals values, its investments or acquisitions...) both good and bad (if bad better, so we can discuss different points of view!)

    Thanks
    Sergi Bresco

Location: Omaha (United States of America)

Sector: Manufacturing, Transportation and storage, Information and communication, Financial and insurance activities

Official website: http://www.berkshirehathaway.com

Key figures:

Valuation Measures
Market Cap (intraday)5: 192.11B
Enterprise Value (Oct 25, 2011)3: 201.04B
Trailing P/E (ttm, intraday): 15.57
Forward P/E (fye Dec 31, 2012)1: 22,553.40
PEG Ratio (5 yr expected)1: 2.58
Price/Sales (ttm): 1.33
Price/Book (mrq): 1.18
Enterprise Value/Revenue (ttm)3: 1.39
Enterprise Value/EBITDA (ttm)6: 8.62

Financial Highlights
Most Recent Quarter (mrq): Jun 30, 2011

Profitability
Profit Margin (ttm): 8.51%
Operating Margin (ttm): 13.01%

Management Effectiveness
Return on Assets (ttm): 3.21%
Return on Equity (ttm): 8.11%

Income Statement
Revenue (ttm): 144.43B
Revenue Per Share (ttm): 87,617.88
Qtrly Revenue Growth (yoy): 20.70%
Gross Profit (ttm): 107.45B
EBITDA (ttm)6: 23.33B
Net Income Avl to Common (ttm): 12.29B
Diluted EPS (ttm): 7,457.95
Qtrly Earnings Growth (yoy): 73.60%

Balance Sheet
Total Cash (mrq): 47.89B
Total Cash Per Share (mrq): 28,939.96
Total Debt (mrq): 56.72B
Total Debt/Equity (mrq): 34.01
Current Ratio (mrq): 0.87
Book Value Per Share (mrq): 98,715.72

Cash Flow Statement
Operating Cash Flow (ttm): 21.02B
Levered Free Cash Flow (ttm): 24.12B

Full Time Employees: 260,000

Nbr. visits: 1610

Nbr. inspires: 6