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.
The Periodic Table of Investments
The investment universe is vast – but it’s also made up of many smaller components. See it all depicted in this nifty periodic table of investments.
Periodic Table of Investments
The investment universe is vast, but it’s also made up of many smaller moving pieces.
For serious investors, the foundation of the discipline is to understand the properties of these individual components, and to have them work in harmony to achieve a specific portfolio goal.
To do this successfully, one must understand the breadth of asset classes, tactics, and categories of investments that exist – and to know how they relate to one another.
The Chemicals Between Us
Today’s infographic comes from Phil Huber, the Chief Investment Officer for Huber Financial Advisors, who has cleverly depicted this relationship graphically in his blog.
Similar to how the physical universe is made up of chemical elements, he sees the possibilities around portfolio management as drawing from a broad pool of investing “elements”. Combine these different elements together, and you get compounds, structures, and eventually entire funds.
The periodic table of investments created by his team denotes each type of investment, the primary and secondary strategy related to it, and a color classification:
Here are the seven objectives that the top letters on each box refer to:
And finally, here are the colors that each block on the periodic table correspond to:
As you can see, considerable thought has been put into the categories and classifications. However, as Phil notes, this is simply the opinion of one person and it is not intended to be a universally accurate depiction of all portfolio management wisdom that exists:
I fully expect that there are a handful of omissions, or perhaps a few areas where one might flat-out disagree with how I’ve laid things out. This was not meant to be 100% exhaustive, nor was it meant to be indicative of what one of our portfolios looks like.
Phil Huber, Chief Investment Officer
For more of the lessons that can be derived from this clever periodic table of investments, we suggest checking out the original post on Huber’s blog.
Is there anything that he missed, or that you think could be classified better?
Here’s How to Become a 401(k) Millionaire
Millionaires are more common than you may think – here are the steps you need to take with your retirement investments to become a 401(k) millionaire.
Here’s How to Become a 401(k) Millionaire
There’s nothing more definitive in the journey to financial freedom than hitting the $1 million mark in retirement savings.
A nest egg like that is a near-guarantee that you could surmount any curveball the world throws at you, whether it is an unexpected family emergency or anything else.
While $1 million certainly sounds like a lofty milestone to many, it’s actually quite a common achievement:
- Millionaire households in the U.S.: 11.3 million (8.95%)
- Total households in the U.S.: 126.2 million
And contrary to popular belief, to become a 401(k) millionaire, you don’t need to strike it rich with a lucky stock pick, or use a crystal ball to forecast the future of the market.
Your best bet is to simply focus only on the factors you can control.
What You Can Control
Today’s infographic is from Tony Robbins, and it covers key points from his #1 Best Selling book Unshakeable: Your Financial Freedom Playbook, which is now available on paperback.
It shows that the biggest winners in the financial game know that they can’t predict the future, and instead titans like Warren Buffett or Jack Bogle focus intently on the factors they can control, knowing that with the right approach they’ll thrive in almost any market.
What are these crucial factors?
|Time||The force of compound interest is more powerful over longer periods of time.|
|Discipline||Staying calm and focused on the long term during periods of turmoil is key.|
|Diversification||Proper asset allocation and frequent re-balancing can position you to weather any storm.|
|Expenses||Expenses and taxes are silent killers, and must be minimized strategically.|
By diligently working to take control of these four factors, your odds of attaining financial freedom are extremely high. Here is each factor in more depth.
The power of compound interest is extraordinary, making time your best friend when it comes to building a battle chest of retirement savings.
The current maximum contribution limit for 401(k)s is $18,500 per year, not including what is matched by your employer. If you maxed out on contributions and started investing early, you can hit $1 million before retirement even in sub-optimal market conditions:
|Starting age||Required returns for $1 million at age 65|
Time can make up for a lack of investing acumen. Wait until later, and things get very difficult – by age 50, you need market beating returns!
If you’re taking advantage of the power of compound interest over a long period of time, whether that is 20, 30, or 40 years, it is inevitable that there will be bumps in the road:
- Stock market corrections happen once a year, on average
- Bear markets happen once in every 3-5 years, on average
- Bear markets vary in length, but on average last one year
Through decades of investing, the fact is you are going to see bear markets – it is how you handle them that counts.
Even when it’s the most tempting to sell, remember these facts:
- Bear markets become bull markets
- The first 12 months of a new bull market can see crucial market gains
- Nobody can successfully time the market – not even the experts
In other words, having the discipline to hold through the turbulence can be the difference maker – and a key factor you can control in your journey to becoming a 401(k) millionaire.
Another factor you control is portfolio diversification, and here are four ways diversification can minimize risk:
|Assets||Stocks, bonds, and alternative assets like real estate or gold.|
|Sectors||Consumer goods, tech, energy, financials, etc.|
|Markets||Domestic, international, emerging markets|
|Time||Add to investments regularly, because there is never a “right” time to buy|
A properly designed portfolio can weather any storm, and re-balancing it on a regular basis will force you to sell assets at market highs, while buying at low points.
The fees on your 401(k) statement might not seem like much, but even 1% or 2% can make a big difference over the long term.
For example: the value of $1 compounding for 50 years at 5% will be worth $11.50, but if it averages 7% it will be worth $29.50. That’s almost three times more!
Expenses, both seen and hidden, can be a silent killer any portfolio, so keeping them to a necessary minimum can help you get to the promised land.
A Final Word
If becoming a 401(k) millionaire was easy, everyone could do it.
But to be successful, you need to take control over factors like time, diversification, discipline, and costs – ideally with a qualified and experienced financial advisor and partner. Then, you need to stick to the plan and let the market do its work.
Investing is a game of inches. If your returns improve by, say, 2 or 3 percentage points a year, the cumulative impact over decades is astounding, thanks to the power of compounding.
– Tony Robbins
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