We're coming to you live from the 2014 Berkshire Hathaway annual shareholder meeting in Omaha, Nebraska. We are transcribing the famous Buffett and Munger Q&A and live chatting with Fools around the globe! Click HERE to set a reminder for yourself about the free live chat. Buffett and Munger begin taking questions at 10:30 am EDT.
Don't own any stock in Warren Buffett's Berkshire Hathaway? You should still pay attention to his annual meeting.
The reflection of the U.S.
Whether describing the society, culture, or economy of the United States, if you could only pick one word, you'd likely chose "diverse." And the same is true of Berkshire Hathaway.
There are countless things to learn from Buffett and Berkshire Hathaway, but the most important thing to know is the reality it, more than any other company, is a reflection of the health of economy in the United States,
Many people know of the investments made by Berkshire Hathaway, especially his "Big Four," but in these too we see four firms which distinctly represent America itself.
Buffett owns 9.2%, or nearly $22 billion worth of Wells Fargo, America's largest bank by market capitalization. Of the biggest banks in America, the one with the greatest concentration of its operations located exclusively here in the U.S.
Then there's the 9.1%, or $16.5 billion stake in Coca-Cola. While it's a great company from an operational perspective, this American icon is actually "the most recognizable—and one of the most valuable—brands in the world," according to Interband. In fact the brand alone was worth nearly $80 billion.
Coca-Cola came in as the third most valuable brand, and fourth was none other than technological titan IBM, of which Buffett owns 6.3% of, or $12.8 billion worth. And this is to say nothing of the 14.2% stake Buffett has in American Express, worth $13.7 billion, which just so happened to be the most valuable brand in financial services sector.
While both Wells Fargo and American Express are somewhat related to each other, it would be tough to suggest they're competitors. And here we see how in just its four biggest investments, we could likely grasp the health of the U.S. economy.
Beyond the investments
Sure the stocks purchased by Buffett grab the headlines, but fewer realize the diversity extends well beyond just the stocks Buffett buys.
Buffett notes in his most recent letter:
Berkshire now owns 8 ½ companies that, were they stand-alone businesses, would be in the Fortune 500. Only 491 ½ to go.
Consider that for a moment. At the Berkshire meeting, in one weekend alone, you're hearing from eight and half of the biggest companies in the United States.
And like the diversity described in the investments, the same is true of those businesses themselves. Excluding the insurance operations, Buffett has a "Powerhouse Five," which couldn't be more different from one another:
- MidAmerican Energy: energy company
- Burlington Northern Santa Fe: railroad
- Iscar: metal tool company
- Lubrizol: specialty chemical manufacturer
- Marmon: manufacturer and equipment company
In fact, Marmon notes on its own homepage it's "a global diversified industrial organization," with "three...companies consisting of 11 diverse, stand-alone business sectors." Berkshire Hathaway is a diverse company which owns diverse companies!
And while you may think the global diversity of Marmon may mean Berkshire Hathaway doesn't take care to put money to work here in America, consider that Berkshire Hathaway spent more than $11 billion of investments in plant and equipment in 2013, of which 89% was done right here in the United States.
Though we invest abroad as well, the mother lode of opportunity resides in America.
This discussion hasn't even mentioned the massive insurance operations of Berkshire Hathaway. Last year alone the combined efforts drew in $77 billion in float -- the money it received from customers used to pay out future claims -- and more than $3 billion in profits. And the thing is, the most recognizable of its insurances businesses, GEICO is actually just its third largest insurance piece. And GEICO itself happens to be the second biggest auto insurer in the United States.
Altogether Berkshire Hathaway has more than 330,000 employees across its more than 80 business, including Fruit of the Loom, Benjamin Moore, Clayton Homes, and many others:
All of this is to say, of the nearly $30 billion Berkshire Hathaway made before taxes last year, it covered a true expanse of industries. And that $30 billion even excludes the money it earned from its $120 billion in investments which wasn't returned through dividends.
When Buffett bought Marmon in 2007 he told Becky Quick of CNBC:
It's a bet, it's a very large bet on America over a long period of time.
Less than one year later in 2008 Buffett entitled a New York Times OpEd:
Buy American. I Am.
And in 2010 he noted:
Money will always flow toward opportunity, and there is an abundance of that in America.
At this weekend's annual meeting, even if you don't own the stock, you can learn not only about Berkshire Hathaway, but the American economy itself. Truly the success of one depends on the other.
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Follow along as we countdown the days until Berkshire Hathaway's annual shareholder meeting in Omaha, Nebraska on May 3. A handful of Fools will be attending the event and live chatting with other Fools around the globe! Click HERE to set a reminder for yourself about the live chat!
The previous articles in our "12 Days of Berkshire" series:
12 Reasons Warren Buffett Is an Incredible Investor and How You Can Learn From Him