Whether you are an experienced investor or just a beginner looking for the right opportunities to start investing, I’m sure you’ve heard of Warren Buffet. He is a brilliant investor and founder of the holding company Berkshire Hathaway. I want to tell you about the stocks of this company.
How did Berkshire Hathaway come into being?
Berkshire Hathaway got its name from the textile company from which it originated. Warren Buffet saw potential in it and therefore began to buy stocks of this company. However, over time, he found out that this was not a good deal, so he wanted to sell the stocks back to the original owner, Seabury Stanton. Although investors agreed on a price of $11,50. Stanton did not honor their agreement.
A few weeks later, he brought to Buffet a contract worth $11,375. That made Buffet angry, and he didn’t sell him any stocks. He did the exact opposite. He bought even more stocks and then gained control of the textile company Berkshire Hathaway.
It could be seen as revenge on his part. Even in this example, we can see that it is necessary to invest rationally, and not based on emotions. Warren Buffet later said it was the worst deal of his life.
The textile company did not work, and so he decided to transform it into a holding company. The story of Berkshire Hathaway as we know it today began. In addition to the textile business, which the company later left for financial reasons, it also deals with many industries, which we will talk about in this article.
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What includes Berkshire Hathaway?
In addition to insurance and investing, this holding company also owns dozens of companies that you are likely to know and use. These include, for example:
- McLane Company
- Precision Castparts
- Fruit of the Loom
As part of the capital investment, the company has invested in companies as Coca-Cola, Apple, Visa, Bank of America, and many others. It was investing that made Warren Buffet one of the wealthiest people in the world. In 2021, his assets reached $100 billion.
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At the time Warren Buffet took over the company, one stock was worth $12,37. Today, 15th April 2021, the price of one stock is $404,000. Here you can see the genius of Warren Buffet. He was able to turn a failing textile company into a successful holding company of interest to investors around the world.
Many huge companies pay stockholders a profit in the form of dividends. They do this mainly to attract investors who like to see the results of investment in their account. However, Berkshire Hathaway does not follow this path. The stockholders of this company received dividends only once. It was in 1967.
However, Warren Buffet claims that they decided without him because he would never agree with paying dividends. In his opinion, it is better to use the money to increase the efficiency of the company. The biggest disadvantage Buffet sees mainly in the taxation of dividends. The stockholder will receive less money than the company could use to improve the company. The company and stockholder lose money. The only one for whom it is advantageous is the state treasury.
Why is the company so successful?
I have already mentioned several reasons in this article. However, the success of Berkshire Hathaway is not only due to its founder Warren Buffet. An important factor in earning this company is the focus on crucial industries. These include the insurance industry, the energy industry, the railroad, and many others. Without these industries, people across the United States would not be able to live.