An Introduction to Berkshire Hathaway

If you’ve never heard of the Berkshire Hathaway, you probably don’t run in circles that typically deal with trading stock on the New York Stock Exchange. Don’t feel left out, very few people know much of anything about Berkshire Hathaway and it there is no real reason for them to. Berkshire Hathaway is primarily an investment vehicle created by billionaire William Buffet and only ridden today by those who have substantial funds available for investment; as of Friday, April 24th, 2009, in the midst of a serious economic downturn, ONE share of Berkshire Hathaway stock was valued at $88,250.10.

A Little Berkshire Hathaway History

The Hathaway Manufacturing company was started in 1888 by a man named Horatio Hathaway who was a China trader that worked primarily in whaling in the Pacific. Originally the company was in cotton milling but this proved not very profitable after World War I, so it was sold to a man named Seabury Stanton who put substantial investment into the company to keep it going. After the Great Depression, the company hit a boom period and did very well, merging with Berkshire Fine Spinning Associates - a milling company in the 1950s. The owner of the company, Seabury was not much of an investment mogul and his shy tactics were soon seen as the cause for a large scaling back and loss of the company’s profitability.

Along Came a Buffett…

In 1962, Warren Buffet began to buy shares in the company and by ’63, he and his associates owed a huge block of the stocks in the company and began to take more interest in the company. Buffet initiated a hostile takeover of the company and changed the management of the company to something that was more suited to his style. He paid the executives of the company very well and allowed them to buy shares in the company but never offered them stock options at all. At this point, the shares of Berkshire Hathaway were up to $18.00 each, up from the $15.00 average that Buffet had bought them at.

In 1967, Buffet got the company involved in the insurance business buy purchasing two Nebraska insurance companies - National Fire and Maine Insurance. This would pave the way for the company to eventually acquire GEICO insurance along with other insurance companies in the eighties. The acquisition of GEICO was a huge boon to Buffet’s holdings, and through it all, his policy of holding the stock options for the companies he purchased through Berkshire Hathaway began to net him more than a little profit.

No Stock Splits

Part of the reason that Berkshire Hathaway is so successful and expensive as a stock and useful to Buffet as an investment vehicle is the fact that Buffet has never paid dividends on the stock, and never once allowed the stock to split, thus the stock continues to grow in value as Buffet continues to manage the major moves of his holding companies and play his cards close to his chest, allowing only a very few choice investors to even get involved with his businesses.