Over the past 50 years, Warren Buffett's Berkshire Hathaway has grown into a massive conglomerate with operations spanning from railroads to energy. As a whole the company is wildly profitable, but are any of these operating subsidiaries better than the rest?
To find some answers, Motley Fool analyst David Hanson recently sat down with Larry Cunningham, the author of The Essays of Warren Buffett: Lessons for Corporate America. Warren Buffett himself said of the book, "Larry Cunningham has done a great job at collating our philosophy." Cunningham also has a new book coming out this fall, titled Berkshire Beyond Buffett: The Enduring Value of Values. The book explores Berkshire's ability to live on after Buffett. In the following video, Cunningham explains why each subsidiary has its own fascination, its own appeal, its own attractiveness; whether it's a colorful founder or an innovative product or an entrepreneurial approach or a certain way of treating customers.
A full transcript follows.
Hanson: As you were researching your book and talking to the various subsidiaries, the various operating businesses under Berkshire's umbrella, was there one that you saw as a crown jewel, as, "If this was a public company, I would love to own shares of just this operating business" -- was there one that stuck out to you a little bit more than others for having great values, but also just a great business?
Cunningham: Well, my wife would say Borsheims if she were here!
But with me, I profile 50 of them, and a deep dive on every one of them. Each one of them has its own fascination, its own appeal, its own attractiveness; whether it's a colorful founder or an innovative product or an entrepreneurial approach or a certain way of treating customers. So, I couldn't name one, because they're all wonderful and appealing.
What I've done in the book, and this is how I thought about it, was that there are clusters of companies that most exemplify particular traits. One of the traits I explore in the book is thrift, or budget consciousness, and GEICO epitomizes that. They are cost-cutters extraordinaire, and then they share all of the savings that they generate with their customers.
I like MidAmerican Energy for its acquisitiveness, and the way that it is very savvy at investing and allocating capital. I like BNSF because of its sense of permanence and long time horizons; it buys equipment that is expected to last for up to 50 years.
So, no; the collection is the thing. But I wouldn't turn away any of them! They're all terrific companies.
That said, there are a few that struggle. There are a few that have thin profit margins. There are some that have low returns on capital and need to correct that, so I prefer the way that it is. I like the big collection, the big gallery of businesses, rather than taking one off at a time.