Connect with us

Investor Education

The Warren Buffett Empire in One Giant Chart

Published

on

Most people know Berkshire Hathaway as the massive conglomerate that serves as the investment vehicle for Warren Buffett’s $83 billion fortune. However, far fewer people know what this giant does, and how it actually makes its money!

The Warren Buffett Series

Part 3: The Warren Buffett Empire

Today’s infographic breaks down the many companies and investments that Berkshire Hathaway owns.

It’s the third part of the Warren Buffett Series, which we’ve done in partnership with finder.com, a personal finance site that helps people make better decisions – whether they want to jump on the cryptocurrency craze or follow Buffett’s more traditional path to financial success.

The Warren Buffet Series: The Early YearsInside Warren Buffett's BrainPart 3Warren Buffett's Biggest Wins and FailsBest Buffett Quotes

Explore the full-screen version of this graphic

The Warren Buffett Empire in One Giant Chart

The Warren Buffett Empire in One Giant Chart

This giant infographic is best viewed using the full-size version. Also, don’t forget to check out Part 1 and Part 2 of our Warren Buffett Series.

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.

Origin Story

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.

The Scoreboard

In the long-running contest of Warren Buffett vs. the market, the scoreboard isn’t even close:

 Berkshire HathawayS&P 500
Total gain (1964-2017)2,404,748%15,508%
Compound annualized gain20.9%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
Insurance$65.527%
BNSF$21.49%
Berkshire Hathaway Energy$18.98%
Manufacturing$50.421%
McLane Company$49.821%
Service and Retailing$26.311%
Finance$8.43%
Total$240.7100%

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:

IndustryCompanyEmployees
FinanceClayton Homes16,362
InsuranceGEICO38,690
ManufacturingPrecision Castparts31,984
ManufacturingFruit of the Loom26,219
ManufacturingShaw Industries21,867
ManufacturingThe Marmon Group12,763
ManufacturingForest River12,185
ManufacturingDuracell2,875
ManufacturingBenjamin Moore1,772
ManufacturingRussell Athletic1,020
ManufacturingBrooks Sports638
Railroad and UtilitiesBNSF Railways41,000
Railroad and UtilitiesBerkshire Hathaway Energy22,773
Service and RetailingMcLane Company23,859
Service and RetailingNetJets6,314
Service and RetailingBH Media Group3,719
Service and RetailingSee’s Candies2,439
Service and RetailingHelzberg Diamonds2,252
Service and RetailingThe Buffalo News618
Service and RetailingBusiness Wire486
Service and RetailingDairy Queen464
n/aBerkshire Hathaway Corporate Office26
n/aOther106,966
Total377,291

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.

Investments
Here are the companies Berkshire Hathaway has significant investments in – the whole portfolio is worth nearly $200 billion:

CompanyValue (Billions)% of Portfolio
Apple28.014.6%
Wells Fargo27.814.5%
Kraft Heinz25.313.2%
Bank of America20.010.5%
Coca Cola18.49.6%
American Express15.17.9%
Phillips 668.24.3%
U.S. Bancorp4.72.5%
Moody's3.61.9%
Bank of NY Mellon3.31.7%
Southwest Airlines3.11.6%
Delta Airlines3.01.6%
Charter Communications2.91.5%
Goldman Sachs2.81.5%
American Airlines2.41.3%
GM2.01.0%
Monsanto1.40.7%
Visa1.20.6%
Other18.09.4%
Total191.2100.0%

The portfolio is pretty much a microcosm of the American economy: it features banks, airlines, consumer goods companies, and even tech behemoths like Apple.

Other Brands
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.

ABC
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.

ESPN
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.

Heinz
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.

Washington Post
Buffett delivered the newspaper as a kid, but later in his life would be the largest outside shareholder of the famous paper.

Salomon Brothers
Buffett helped lead a desperate shakeup at one of Wall Street’s most famous investment banks.

USAir
After almost losing all the $358 million he had invested, Buffett called buying preferred shares in the airline one of his biggest mistakes.

Gillette
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.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Comments

Investor Education

Opportunity Zones: Aligning Public and Private Capital

Opportunity zone funds (OZFs) can help the neighborhoods that need it most, while also providing significant tax benefits for investors.

Published

on

Opportunity Zones

Opportunity Zones: Aligning Public and Private Capital

At the end of 2017, a potential $6.1 trillion in unrealized capital gains was available for reinvestment.

Throughout the U.S., unrealized capital gains have significant tax implications with enormous potential. Unrealized capital gains occur when the value of an asset has gone up on paper, but has not yet been sold for a profit. Taxes are triggered once the asset has been sold.

Investors can offset or defer these taxes in a few ways, including one new strategy: investing in opportunity zones.

Today’s infographic from Bedford Funds explains what opportunity zone funds are, their core benefits, and their potential impact across the country.

What is an Opportunity Zone?

Opportunity zones are U.S. Census tracts whose citizens experience economic distress.

Originating in the 2017 Tax Cuts and Jobs Act, they offer the potential to connect long-term capital with low-income communities across the country to drive return and impact.

How are opportunity zones chosen? The initial base is low-income census tracts, which have:

  • Poverty rates of at least 20%; or
  • Median family incomes lower than 80% of the surrounding area

The state’s governor or chief executive then nominates up to 25% of these areas as opportunity zones. Nationwide, a total of 8,700 opportunity zones exist, and 7.9 million of the areas’ residents live in poverty.

Overall, 35 million people live in these opportunity zones. There are a number of disparities between opportunity zones and notional averages across key variables:

 Poverty RateMedian Family IncomeEducation*
Opportunity Zones27.1%$47,31618.1%
National Average14.1%$73,96531.5%

*Adult with Bachelor’s degree or higher

It’s evident these cities could benefit from increased investment.

What is an Opportunity Zone Fund?

An opportunity zone fund (OZF) is an investment vehicle that provides tax benefits for private capital to help revitalize economically distressed communities. Both operating businesses and real estate are eligible for investment.

Many investor types may take advantage of opportunity zone funds:

  • Corporations– Also includes partnerships
  • Accredited investors– Defined as high net worth individuals, brokers, and trusts
  • Nonresident foreign investors– Only on capital gains earned in the U.S.
  • Retail investors– Through funds that have lower minimums, though options are more limited

In addition to their wide eligibility, OZFs have a number of potential benefits.

Benefits

Tax breaks on capital gains can be organized into three tiers:

  • Initial Tax Deferral– Once the previously-earned capital gains are channeled into a qualifying OZF, federal tax is deferred until December 31, 2026 or the date the investment is sold— whichever comes sooner
  • Step-Up In Basis10% of the original capital gains will be excluded from federal taxes if an investment is held for five years
  • Capital Gains Tax Exclusion– Federal tax on capital gains earned within the OZF is 100% eliminated if an investment is held for 10 years

All things being equal, OZFs realize after-tax outcomes that are over 40% higher than a standard portfolio investment. For example, the potential after-tax value of a $100 investment after a 10-year holding period would be as follows.

 Initial InvestmentNet after-tax value
OZF$100$175.30
Standard portfolio investment$76.20 ($100- 23.8% capital gains tax)$132.36

*Note: assumes long-term federal capital gains tax rate of 23.8%, no state income tax, and annual appreciation of 7% for both the OZF and alternative investment.

While it takes a few years to realize these tax benefits, OZFs have long-term horizons to encourage sustained investment with a lasting impact. The result is the potential for sustainable and equitable wealth creation.

Future Impact

Although real estate investments have captured significant attention, recent regulation has clarified that operating businesses are also eligible OZF investments.

By investing in businesses, OZFs can have a direct impact on economic growth and job creation.

Ultimately, OZFs have the potential to catalyze collective impact through their scalable operating company and real estate investments. Working directly with community leaders, OZFs can help drive long-term rejuvenation from within, versus gentrification from outside forces.

Opportunity zone funds are projected to raise $44 billion in capital designed specifically to invest in this future growth.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading

Finance

Bridging the Gap: Wealth Isn’t Just for the Wealthy

The UK has a financial adviser gap, leaving about 51 million adults without advice. Learn how wealthtech makes investing accessible for everyone.

Published

on

wealthtech

In the UK, money is the #1 cause of stress—ranking above physical health, work, or family.

When people begin investing, they see immediate emotional benefits compared to non-investors. In fact, investors are 16 percentage points happier, and 23 percentage points more positive about their well-being.

However, only 37% of Brits hold market-based investments. So why aren’t more people taking steps to invest? Today’s infographic from BlackRock outlines the barriers people face, and how wealthtech can help address these issues at scale.

wealthtech

The Wealth Problem

A variety of hurdles keep people from taking control of their finances.

  1. Lack of Resources: 59% of Brits feel they don’t have enough money to invest.
  2. Lack of Knowledge: 39% say a lack of knowledge holds them back.
  3. Fear of Failure: 34% are afraid of losing everything if they invest.

All of these factors culminate in insufficient investing. In fact, 50% of the €26 trillion European wealth market is currently in uninvested cash, earning zero interest.

What’s the Current Solution?

Traditionally, investment advisers helped tackle these issues. However, investors have faced challenges accessing professional advice in recent years.

A shortage of UK advisers is a main contributing factor:

  • There are only 26,700 advisers, who can service an average of 100 clients each.
  • This leaves over 51 million adults without professional advice.

Among available advisers, many impose investment minimums or fees that create barriers for lower-income populations. Financial advisers charge an average of £150/hour, and half of all surveyed advisers turned away clients with less than £50,000 to invest.

With so many hurdles to overcome, how can Brits take charge of their investments?

A Modern Solution

Wealth technology—or simply wealthtech—helps address these issues at scale, offering four main digital-first solutions:

  1. Helps investors build better portfolios.
    Gone are the days of rudimentary spreadsheets. With the help of algorithms and machine learning, investors can now automatically build sophisticated portfolios.
  2. Helps advisors scale their services.
    The automation of time-consuming processes allows advisers to service more clients.
  3. Reaches more people.
    Wealthtech is accessible for all, not just the wealthy. For example, micro-investing apps allow investors to make small, regular contributions without paying a commission.
  4. Modernises infrastructure.
    Wealthtech updates old legacy systems with more streamlined, automated systems. As a result, paper-based processes are replaced with mobile transactions that can be done with the click of a button.

These benefits can be applied across various branches of wealth management.

The Wealthtech Ecosystem

Investors can choose one of three main paths, based on their level of knowledge and interest.

“Do It Yourself” Investing
Confident investors who enjoy managing their own money can trade securities through self-directed online platforms.

“Do It For Me” Investing
Novice investors can use platforms that execute trades on their behalf, such as micro-investing or robo-advisers.

“Do It With Me” Investing
For investors in the middle of this spectrum, certain platforms offer a hybrid of digital transactions and professional advice.

With a wide variety of solutions available, investing has never been easier.

Inclusive Wealth-Building

It’s clear Brits are open to the shift: 64% say new technology would help them be more involved in their investments.

As wealthtech evolves, it will be seamlessly integrated into daily life as part of a holistic financial services offering. Traditional barriers will be broken down, empowering individuals to take charge of their financial future.

Subscribe to Visual Capitalist

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Continue Reading
PredictIt The Stock Market For Politics

Subscribe

Join the 180,000+ subscribers who receive our daily email

Thank you!
Given email address is already subscribed, thank you!
Please provide a valid email address.
Please complete the CAPTCHA.
Oops. Something went wrong. Please try again later.

Popular