The Warren Buffett Empire in One Giant Chart
If you look at any ranking of the world’s richest people, you will notice that most of the names derive their wealth from building individual, successful companies.
Topping today’s rich list is Jeff Bezos, who started Amazon in 1994. Further down, you see familiar names like Bill Gates (Microsoft), Amancio Ortega (Zara), Mark Zuckerberg (Facebook), Larry Ellison (Oracle), and so on.
Warren Buffett, who appears third on such a list, is completely unique in this sense. Through his holding company Berkshire Hathaway, he has bought, sold, or invested in hundreds of companies over the years, and their industries are all over the map. These investments include consumer goods companies like Coca-Cola, daily national newspapers like The Washington Post, and insurance companies like GEICO.
Buffett currently owns 36.8% of Berkshire – and at the time of publishing, Berkshire Hathaway is worth an impressive $480 billion, employing 377,000 people across many different industries.
Although Berkshire Hathaway is today associated with Buffett and his long-time partner Charlie Munger, the origins of the company actually stem from 1839.
The original company was a textile mill in Rhode Island, and by 1948 Berkshire employed 11,000 people and brought in $29.5 million in revenue (about $300 million in today’s dollars).
After Berkshire’s stock began to decline in the late 1950s, Buffett saw value in the company and started accumulating shares. By 1964, Buffett wanted out, and the company’s CEO Seabury Stanton tendered an offer to buy Buffett’s shares for $11.37, which was $0.13 less than he had promised.
This made Buffett mad, and instead of taking the offer, he opted to buy more shares. Eventually he took control of the company and fired Stanton.
The company was his, and the rest is history.
In the long-running contest of Warren Buffett vs. the market, the scoreboard isn’t even close:
|Berkshire Hathaway||S&P 500|
|Total gain (1964-2017)||2,404,748%||15,508%|
|Compound annualized gain||20.9%||9.9%|
Source: BH Annual Report. BH’s market value is after-tax, and S&P 500 is pre-tax, including dividends.
If you’re wondering how Warren Buffett developed such an impressive investing record, it’s worth seeing Part 2 of this series: Inside Buffett’s Brain.
Revenue by Business Segments
The Warren Buffett Empire is diverse, and made up of hundreds of companies in different industries.
However, segmenting by revenue does give an idea of how Berkshire makes its money:
|Revenue (Billions, 2017)||% of Total|
|Berkshire Hathaway Energy||$18.9||8%|
|Service and Retailing||$26.3||11%|
The Berkshire Portfolio
Berkshire Hathaway’s portfolio can be broken down into two categories: the companies it owns outright (or majority stakes in), and the companies it owns significant investments in.
Companies Owned by Berkshire
Berkshire Hathaway owns well-known brands ranging from Dairy Queen to Duracell. Here are all those companies listed by number of employees:
|Manufacturing||Fruit of the Loom||26,219|
|Manufacturing||The Marmon Group||12,763|
|Railroad and Utilities||BNSF Railways||41,000|
|Railroad and Utilities||Berkshire Hathaway Energy||22,773|
|Service and Retailing||McLane Company||23,859|
|Service and Retailing||NetJets||6,314|
|Service and Retailing||BH Media Group||3,719|
|Service and Retailing||See’s Candies||2,439|
|Service and Retailing||Helzberg Diamonds||2,252|
|Service and Retailing||The Buffalo News||618|
|Service and Retailing||Business Wire||486|
|Service and Retailing||Dairy Queen||464|
|n/a||Berkshire Hathaway Corporate Office||26|
Importantly, you’ll notice that there are only 26 employees in Berkshire Hathaway’s corporate office – that’s because Buffett is adamant that portfolio companies need to be well-managed in their own right, and he thinks this decentralization is a key to his success.
Here are the companies Berkshire Hathaway has significant investments in – the whole portfolio is worth nearly $200 billion:
|Company||Value (Billions)||% of Portfolio|
|Bank of America||20.0||10.5%|
|Bank of NY Mellon||3.3||1.7%|
The portfolio is pretty much a microcosm of the American economy: it features banks, airlines, consumer goods companies, and even tech behemoths like Apple.
Lastly, it’s worth noting that Buffett doesn’t stop there – his company also owns 80 auto dealerships, the second-largest real estate broker in the country (HomeServices of America), and even 32 daily newspapers.
Deals that Made the Empire
The Warren Buffett Empire wouldn’t exist without Buffett being involved in some of most famous deals in business history. Below are some of the big names Buffett has been involved with.
Buffett helped finance the Capital Cities takeover of ABC – at the time, the largest non-oil merger in history. Eventually, CapCities/ABC was sold to Disney.
Before ESPN was the household name it is today, Buffett owned a big chunk of it as an upstart sports brand in 1985, as a part of the CapCities/ABC deal.
Berkshire Hathaway and 3G Capital led a takeover of Heinz in 2013. This gave Buffett control of trusted brands like HP Sauce, Lea & Perrins, as well as the namesake brand.
Buffett delivered the newspaper as a kid, but later in his life would be the largest outside shareholder of the famous paper.
Buffett helped lead a desperate shakeup at one of Wall Street’s most famous investment banks.
After almost losing all the $358 million he had invested, Buffett called buying preferred shares in the airline one of his biggest mistakes.
Buffett started buying shares in the last 1980s, and became Gillette’s biggest shareholder. Buffett made $4.4 billion in paper profit when it sold the company to Proctor & Gamble.
Sustainable Investing: Debunking 5 Common Myths
Do sustainable strategies underperform conventional ones? This infographic shines a light on the realities of sustainable investing and the ESG framework.
Sustainable Investing: Debunking 5 Common Myths
It began as a niche desire. Originally, sustainable investing was confined to a subset of investors who wanted their investments to match their values. In recent years, the strategy has grown dramatically: sustainable assets totaled $12 trillion in 2018.
This represents a 38% increase over 2016, with many investors now considering environmental, social, and governance (ESG) factors alongside traditional financial analysis.
Despite the strategy’s growth, lingering misconceptions remain. In today’s infographic from New York Life Investments, we address the five key myths of sustainable investing and shine a light on the realities.
|Sustainable strategies underperform conventional strategies||Sustainable strategies historically match or outperform conventional strategies|
In 2015, academics analyzed more than 2,000 studies—and found that in roughly 90% of the studies, companies with strong ESG profiles had equal or better financial performance than their non-ESG counterparts.
A recent ranking of the 100 most sustainable corporations found similar results. Between February 2005 and August 2018, the Global 100 Index made a net investment return of 127.35%, compared to 118.27% for the MSCI All Country World Index (ACWI).
The Global 100 companies show that doing what is good for the world can also be good for financial performance.
—Toby Heaps, CEO of Corporate Knights
|Sustainable investing only involves screening out “sin” stocks||Positive approaches that integrate sustainability factors are gaining traction|
In modern investing, exclusionary or “screens-based” approaches do play a large role—and tend to avoid stocks or bonds of companies in the following “sin” categories:
However, investment managers are increasingly taking an inclusive approach to sustainability, integrating ESG factors throughout the investment process. ESG integration strategies now total $17.5 trillion in global assets, a 69% increase over the past two years.
|Sustainable investing is a passing fad||Sustainable investing has been around for decades and continues to grow
Over the past decade, sustainable strategies have shown both strong AUM growth and positive asset flows. ESG funds attracted record net flows of nearly $5.5 billion in 2018 despite unfavorable market conditions, and continue to demonstrate strong growth in 2019.
Not only that, the number of sustainable offerings has increased as well. In 2018, Morningstar recognized 351 sustainable funds—a 50% increase over the prior year.
|Interest in sustainable investing is mostly confined to millennials and women||There is widespread interest in sustainable strategies, with institutional investors leading the way|
Millennials are more likely to factor in sustainability concerns than previous generations. However, institutional investors have adopted sustainable investments more than any other group—accounting for nearly 75% of the managed assets that follow an ESG approach.
In addition, over half of surveyed consumers are “values-driven”, having taken one or more of the following actions with sustainability in mind:
- Boycotted a brand
- Sold shares of a company
- Changed the types of products they used
Women and men are almost equally likely to be motivated by sustainable values, and half of “values-driven” consumers are open to ESG investing.
5. Asset Classes
|Sustainable investing only works for equities||Sustainable strategies are offered across asset classes|
This myth has a basis in history, but other asset classes are increasingly incorporating ESG analysis. For instance, 36% of today’s sustainable investments are in fixed income.
While the number of sustainable equity investments remained unchanged from 2017-2018, fixed-income and alternative assets showed remarkable growth over the same period.
Tapping into the Potential of Sustainable Investing
It’s clear that sustainable investing is not just a buzzword. Instead, this strategy is integral to many portfolios.
By staying informed, advisors and individual investors can take advantage of this growing strategy—and improve both their impact and return potential.
China: An Investment Opportunity Too Big To Ignore
In 2020, China will lift the restrictions on foreign ownership, creating a significant investment opportunity that cannot be ignored.
Since the implementation of the initial Open Door Policy in 1978, China has experienced rapid development—making it the world’s second largest economy in nominal terms.
In the next year, the country will move into the next phase of opening up its economy by lifting restrictions on the foreign ownership of securities, insurance, and fund management firms, and this will make the economy more accessible to the outside world than ever before.
An Opportunity Too Big To Ignore
Today’s infographic from BlackRock explores the steps China’s markets have taken to attract foreign capital on a global scale.
China’s moves are funding the nation’s next stage of growth, and are also creating new investment opportunities for foreign investors.
The China Investment Opportunity
Currently, foreign investors hold just 3% of total Chinese securities, despite the country having the world’s second largest stock and bond market globally.
As the onshore equity and fixed income markets open up, investors have the opportunity to gain exposure to more sectors, particularly those that focus on the domestic economy.
China’s large consumption base of 1.3 billion consumers is a powerful engine of growth, with consumer spending increasing to $4.7 trillion in 2017, from $3.2 trillion in 2012.
Ensuring Sustainable Growth
There are structural reform gaps that need to be addressed in order to ensure China’s growth is sustainable.
These reforms, which seek to correct imbalances caused by uneven economic growth, cover many areas of the economy. They affect the government, as well as corporate, financial and household sectors.
Some of these key reforms include:
- Capital reallocation: Debt reduction and interest rate liberalisation
- Income redistribution: Property, household and corporate tax reduction
- Market regulation: Supply-side reform and environmental protection
- Institutional framework: Intellectual property protection, and reformation of the hukou— China’s registration program, which serves to regulate population distribution and rural-to-urban migration
With 22 reforms currently in progress, the long-term impact is expected to be tremendously positive for growth.
Opening Up the Great Wall
China has shown great support for economic globalisation, and has already been making strides to open its markets to the rest of the world.
- 2002: Qualified Foreign Institutional Investor (QFII) scheme launches
- 2011: Renminbi Qualified Foreign Institutional Investor (RQFII) scheme launches
- 2014: Shanghai/Hong Kong Stock Connect launches
- 2016: Shenzhen/Hong Kong Stock Connect launches
- 2017: Bond Connect scheme launches
- 2018: MSCI announces 20% inclusion factor of A-shares
- 2019: Bloomberg Barclays Global Aggregate Index begins including yuan-denominated bonds
- 2020: JPMorgan Chase & Co. plans to add Chinese government debt to index
These index inclusions will result in a substantial inflow of new investor funds. According to Goldman Sachs, Bloomberg’s decision to increase the weighting of Renminbi-denominated government and policy bank securities in the Bloomberg Barclays Global Aggregate Index could attract between $120-$150 billion in new investments into Chinese debt markets.
New China vs. Old China
China has transformed from an export-driven and rural country, into a global manufacturing and technology superpower.
Foreign direct investment (FDI) inflows into China’s tech sector have been rising significantly, and currently account for almost a third of total FDI.
China already has the world’s largest robot market, and the government is actively promoting the robotics industry with tax reductions and special R&D funding.
—Victoria Mio, CIO Chinese Equities, Robeco
China’s ambitious “Made in China 2025” ten year plan will lower its dependency on imported technology and make China a dominant player in global technology manufacturing.
An Economic Force To Be Reckoned With
China will inevitably face challenges as it proceeds to lead global economic growth. However, its changing economy is creating a new landscape of opportunity for potential growth, and may continue to do so for the coming years.
The continuous expansion of market access, combined with new policies that promote foreign investment, have helped improve investor confidence. If foreign investors exclude China from their portfolio, they risk missing out on the huge potential of this rapidly expanding market.
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