Berkshire's Business in Three Great Pictures

Last month, multi-billionaire megainvestor Warren Buffett confirmed that Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) was upping its buyback authorization and would begin buying back stock at prices anywhere up to 1.2 times book value -- prompting a lot of investors to respond: "Great! But, uh, what exactly is book value?"

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Technically speaking, book value is defined as: "The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities."

But if that definition just leaves you asking again, "so, um, what does that mean?" then maybe this will help. You know the old expression about a sum being greater than the whole of its parts, right? Well, the price of the "sum" for Berkshire is the price of the stock -- currently 1.2 times the price of the parts. And the price of those "parts" -- that's book value.

...and parts
To firm up the picture even further, though, we thought we'd take a closer look at Berkshire for you, and sketch out for you in a bit more detail exactly what Berkshire's various parts are -- and how they've grown in value over time. Here they are, in three simple illustrations.

First, the business. Most folks, when they hear the name Berkshire Hathaway, probably think first of the GEICO subsidiary, and its famous gecko mascot. But Berkshire is a whole lot more than just GEICO. In fact ... see if you can spot the gecko's hangout among all these piles of revenue.

Now, let's take a look at a few odds and ends of other companies that Buffett has picked up and tucked away within Berkshire's portfolio over the years. There are literally dozens of them, so here we'll show you just the biggies:

And finally, here's a quick glimpse of how the value of all the above -- plus a little bit of Buffett magic to make that value grow -- has increased over time relative to the S&P 500. Hint: If you had started with an investment value of $10,000, 46 years in "the stock market" would have transformed that into $639,700 through 2011. Put the same start-up capital in Berkshire stock, though, and you'd have ended up with more than $51 million.

Warren Buffett's long track record of success has made him one of the best investors of all time. With the Buffett at the helm, Berkshire Hathaway has grown book value per share at a compounded annual rate of 19.8% for nearly 50 years! Despite an incredible historical track record, investors have to understand the key issues to watch moving forward. To help investors, The Fool's resident Berkshire Hathaway expert Joe Magyer has created this premium research report on the company. Inside, you'll receive ongoing updates as key news hits, as well as reasons to both buy and sell the stock. Claim a copy by clicking here now.


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  • Report this Comment On January 14, 2013, at 5:33 PM, jordanwi wrote:

    Okay, fine. I'll by some by the month's end.

  • Report this Comment On January 19, 2013, at 11:22 AM, snickerdoodle9 wrote:

    I Will Be Adding More Shares Of Brk.B ( 50 ) To An Already 150 Shares With Dividend Payouts That I Receive From Corp. Bond / Blue Chip Companies Which Payout Once Every 6 Months . Since The Split Of Brk.B Shares 2 Years Ago , Shares Have Risen About $30.00 . Of Course I Will Wait For A Market Sell Off To Back Up My " Bargain Truck " And Pull The Trigger ;-) .

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