- The share price of Warren Buffett’s Berkshire Hathaway Inc. reached $500,000 apiece on Monday, March 14, 2022.
- Berkshire Hathaway mostly operates in the USA, but it is expanding its business and plans to add 600 stores in China, which is its largest market outside of the United States.
- Buffett controls nearly 32.1% of the voting power in Berkshire Hathaway and shareholder proposals that he opposes normally fail by big margins.
The share price of Warren Buffett’s Berkshire Hathaway Inc. reached $500,000 apiece on Monday, March 14, 2022. The company’s class A shares have outperformed the S&P 500 index, which has fallen 12%, showing that it is defensive in a market that is facing the wrath of the Russia-Ukraine conflict, amid rising inflation.
The shares of the Omaha-Nebraska based company closed at $493,785.00 on Tuesday. When it reached its all-time high, it had a market capitalization of approximately $731 crores, ranking sixth in the US, after Apple Inc., Microsoft Corp, Alphabet Inc., Amazon.com Inc., and Tesla Inc.
Warren Buffet’s “polite description” for reason behind recent valuations
“Deceptive ‘adjustments’ to earnings” is how the Oracle of Omaha, Warren Buffett, has taken to describe the often dubious methods of accounting that are being used to boost the value of stocks today. In his now-infamous letters to Berkshire Hathaway’s shareholders, he said that this is a “polite description” for these actions, which have become “more frequent and more fanciful as stocks have risen.”
How Berkshire Hathaway has prepared for the future
Ace investor Warren Buffett has a 16.2% stake in the company and with this surge in its share price, he became the world’s fifth-richest person with a net worth of $119.2 billion, according to Forbes.
Bill Smead, chief executive of Smead Capital Management Inc in Phoenix, said Berkshire specializes in “on the ground, Main Street-esque business activity.”
“They’re big and they’re not a tech stock, and investors get comfort from that,” he added. Smead Capital Management Inc has invested $4.3 billion in Berkshire Hathaway.
Berkshire Hathaway is a diversified holding company that is engaged in insurance, energy generation and distribution, freight rail transportation, manufacturing, retailing, services, and other activities. It generated a record $27.46 billion of operating profit last year, including gains at Geico car insurance, the BNSF railroad and Berkshire Hathaway Energy. The company owns other businesses like the largest US residential real estate brokerage and the fast-growing Clayton Homes mobile home unit.
Berkshire Hathaway mostly operates in the USA, but it is expanding its business and plans to add 600 stores in China, which is its largest market outside of the United States. It has a total of 372,000 employees, out of which 77% work in the US.
It was a struggling textile company in 1965 and its shares traded below $20 when Warren Buffett took over. Its class B shares are worth approximately 1/1500th of its class A shares.
The company’s shareholders had proposed that
- Berkshire Hathaway shall replace Warren Buffett as chairman
- Report on its plans to handle climate risk
- Reduce greenhouse gases
- Improve diversity.
The company urged the rejection of these proposals. Warren Buffett has been running the company since 1965. He received $373,204 in compensation for 2021, down from $380,328 received in 2021. This comprises his usual $100,000 salary plus personal and home security.
Vice-Chairmen Greg Abel and Ajit Jain oversee its non-insurance and insurance operations. In 2021, they were each awarded $19 million for a third straight year. Warren Buffett sets their remuneration.
The company is 100% prepared if Warren Buffett could not continue. Abel would become CEO and Buffett’s son Howard Buffett would become non-executive chairman and his primary duty will be to ensure that Berkshire’s culture remains intact.
Currently, Warren Buffett holds both of these roles and one of the above shareholder proposals from the National Legal and Policy Center said those roles are “greatly diminished” weakening governance, and that an independent director should become chairman. Berkshire’s directors agree that is a good idea, but only after Buffett is no longer CEO.
Todd Combs and Ted Weschler will have the responsibility of managing Berkshire Hathaway’s investment portfolio.
His will instructs the executors – and, in time, the trustees – to each year convert a portion of his A shares into B shares and then distribute the Bs to various foundations.
His children are charged with running a foundation that will receive a portion of his Berkshire stock to use towards philanthropy.
Apart from this, the company rejected environmental proposals as well and said that Berkshire said many operating units already make disclosures concerning climate risks, and its insurance operations appropriately manage risks from greenhouse gases.
Its operating businesses have committed to diversity, equity and inclusion without needing direction from Buffett, the company added in a filing. Buffett controls nearly 32.1% of the voting power in Berkshire Hathaway and shareholder proposals that he opposes normally fail by big margins.
Berkshire Hathaway’s Portfolio
Warren Buffett and his business savvy ways helped in making Berkshire Hathaway a leading conglomerate. The legendary investor was selective in opening new positions in the second quarter of 2021, however, Berkshire bought 1,550,481 shares in Organon, a pharmaceutical company for $46.9 million. Berkshire Hathaway invested over $5 billion in Occidental Petroleum Corp as oil prices soared. Its other investments include
| Stock | Number of Shares Owned | Share Count Increase/(Decrease) from Q1 2020 | Value of Total Stake |
| Aon | 4,396,000 | 7.3% | $1 billion |
| Kroger | 61,787,910 | 21% | $2.4 billion |
| RH | 1,791,967 | 2% | $1.2 billion |
| AbbVie | 20,527,861 | (10.2%) | $2.3 billion |
| Bristol Myers Squibb | 26,294,266 | (15.3%) | $1.8 billion |
| Chevron | 23,123,920 | (2.3%) | $2.4 billion |
| General Motors | 60,000,000 | (10.4%) | $3.6 billion |
| Liberty Global Class C | 1,876,522 | (74.5%) | $50.7 million |
| Marsh & McLennan | 4,196,692 | (20.6%) | $590.4 million |
| Merck | 9,157,192 | (48.8%) | $712.2 million |
| U.S. Bancorp | 128,888,906 | (0.6%) | $7.3 billion |
Some of the top stocks that Warren Buffett owns by size are
| Stock | Number of Shares Owned | Value of Stake |
| Apple | 907,559,761 | $130.6 billion |
| Bank of America | 1,032,852,006 | $44.7 billion |
| American Express | 151,610,700 | $27 billion |
| Coca-Cola | 400,000,000 | $21.6 billion |
| Kraft Heinz | 325,634,818 | $12 billion |
| Moody’s | 24,669,778 | $9.2 billion |
| U.S. Bancorp | 147,315,527 | $8.9 billion |
| Verizon Communications | 158,824,575 | $8.7 billion |
| BYD | 225,000,000* | $6.9 billion |
| DaVita | 36,095,570 | $4.4 billion |
