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Berkshire Hathaway SWOT & PESTLE Analysis

ID : 52495453| Dec 2018| 15 pages

COMPANY PROFILE -Berkshire Hathaway

Business Sector :Conglomerate

Operating Geography :United States, Global

About Berkshire Hathaway :

Berkshire Hathaway is an American conglomerate and a holding company headquartered in Omaha, Nebraska. Led by the legendary investor by Warren Buffett, it owns subsidiaries operating in multiple sectors across the world. The businesses owned by the company are: Insurance, Burlington Northern Santa Fe LLC, McLane Company, Berkshire Hathaway Energy, Service & Retailing, Manufacturing and Finance & financial products. Insurance business comprises GEICO, General Re Corporation, Berkshire Hathaway Primary Group and Berkshire Hathaway Reinsurance Group. Burlington Northern Santa Fe LLC operates railroad systems to transport industrial products to major cities and ports of USA, as well as some parts of Canada and Mexico. McLane Company provides different types of wholesale distribution services. Berkshire Hathaway Energy Company is involved in generation, transmission, storage, distribution and supply of energy. Manufacturing businesses are involved in manufacture of industrial products, building products and consumer products.

Berkshire Hathaway Revenue :


US$ 242.173 billion – FY ended December 31st 2017(year-on-year growth of 8.3%)
US$ 223.604 billion - FY ended December 31st 2016

Ownership / Major shareholders :

Warren Buffet owns 30.7% voting power and 16.45% interest

Competitive Analysis of Berkshire Hathaway

SWOT
PESTLE
The SWOT analysis of Berkshire Hathaway is presented below:
Strengths
Weaknesses
1. Diverse portfolio of businesses across sectors
2. Strong liquidity position with no debt
3. Sound investment decisions of Warren Buffett and his team
4. Consistent 5-year growth rate despite economic slowdown
1. Steadily increasing volatility
2. Dependency on a few people for major decisions
Opportunities
Threats
1. Bargain hunting during a recession
2. Investing in emerging markets such as India and China
1. High competition faced by the company’s businesses
2. Increasing pace of regulatory changes
3. Threat from cyber attacks
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Detailed SWOT Analysis of Berkshire Hathaway

 

Strength

1. Diverse portfolio of businesses across sectors: Berkshire Hathaway owns many businesses across different sectors like insurance, media, utilities etc. This portfolio of diverse investments ensures that the company can tide over slowdowns in a particular sector through favourable returns obtained from other high performing sectors. However, in case of a booming economy with all sectors rising, the combined returns obtained by the company would be phenomenal. The company can then choose to exit that sector and focus on other sectors, or alternatively choose to move into the renewable energy business if it finds a suitable investment target. Berkshire also has stakes in 15 companies in different sectors that had the largest market value as of the end of 2017. Some of these investments are in major corporations like American Express, Apple, Moody’s, Coca Cola and Wells Fargo.

2. Strong liquidity position with no debt: Berkshire Hathaway maintains strong liquidity with low debt levels. Buffett has reduced the average maturity of Berkshire’s bond portfolio so he can act quickly. With more than $100 billion in cash and cash equivalents as of 2018, Berkshire Hathaway now one of world’s largest owners of Treasury bills. This large cash pile ensures that Berkshire never faces any financial obligations and the company can leverage on investment opportunities at the appropriate time.

3. Sound investment decisions of Berkshire Hathaway led by Warren Buffett and team: Berkshire Hathaway was originally a textile company in which Warren Buffett had invested in 1962. When the company could not compete with foreign lower cost textiles, he decided to turn the company into a holding company that would be dedicated to investment in companies that have a sustainable business advantage, also called ‘wide-moat businesses’. This led to Berkshire having a presence in many sectors today. Buffett and his team could also manage to make money from the company’s insurance business by tactfully using the excess cash (float) gained from the insurance business to buy companies. Buffett and his team have made bold investments in businesses where other investors feared to invest.

4. Consistent 5-year growth rate despite economic slowdown: In Q3 2018, most of Berkshire’s businesses showed high growth rates of operating income: 100% for insurance, 9.9% for BNSF (railroad), 14.6% for energy, 5% for apparel and 8% for Duracell. Only manufacturing and service & retail businesses showed a fall in operating income of 24%. These growth rates were for just one quarter and during strong economic conditions. However, during the last 5 years, the economy’s growth rate was below 3%. Even then, Berkshire’s 5-year CAGR of revenue and net income (8.3% and 24.8% respectively) far exceeded the combined 5-year CAGR of revenue and net income for S&P 500 companies (1.8% and 3.5% respectively).

Weakness

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Opportunity

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Threat

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Check out analysis of other relevant companies

TABLE OF CONTENTS
DELIVERY AND FORMAT
WHY CHOOSE US?
References used in Berkshire Hathaway Analysis Report

1. The Effect of Interest Rates on Business https://smallbusiness.chron.com/effect-interest-rates-business-69947.html

2. Rising interest rates punish US power sector https://www.ft.com/content/edd543d0-1772-11e8-9e9c-25c814761640

3. Insurance 2020: Turning change into opportunity https://www.pwc.com/im/en/industries/life-insurance/assets/insurance_2020_turning_change_into_opportunity.pdf

4. The sharing economy’s effect on business https://source.wustl.edu/2016/09/sharing-economys-effect-business/

Copyrights and Disclaimer

Berkshire Hathaway SWOT and PESTLE analysis has been conducted by Nipunn V and reviewed by senior analysts from Barakaat Consulting.

Copyright of Berkshire Hathaway SWOT and PESTLE Analysis is the property of Barakaat Consulting. Please refer to the Terms and Conditions and Disclaimer for usage guidelines.

Berkshire Hathaway SWOT & PESTLE Analysis
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