Berkshire Hathaway Joins the S&P 500 Today

Berkshire Hathaway traces its roots to a textile manufacturing company established by Oliver Chace in 1839 as the Valley Falls Company in Valley Falls, Rhode Island. Chace had previously worked for Samuel Slater, the founder of the first successful textile mill in America. Chace founded his first textile mill in 1806. In 1929 the Valley Falls Company merged with the Berkshire Cotton Manufacturing Company established in 1889, in Adams, Massachusetts. The combined company was known as Berkshire Fine Spinning Associates.

In 1955 Berkshire Fine Spinning Associates merged with the Hathaway Manufacturing Company which was founded in 1888 in New Bedford, Massachusetts by Horatio Hathaway. Hathaway was successful in its first decades, but it suffered during a general decline in the textile industry after World War I. At this time, Hathaway was run by Seabury Stanton, whose investment efforts were rewarded with renewed profitability after the Depression. After the merger Berkshire Hathaway had 15 plants employing over 12,000 workers with over $120 million in revenue and was headquartered in New Bedford, Massachusetts. However, seven of those locations were closed by the end of the decade, accompanied by large layoffs.

In 1962, Warren Buffett began buying stock in Berkshire Hathaway. After some clashes with the Stanton family, he bought up enough shares to change the management and soon controlled the company.

Buffett initially maintained Berkshire's core business of textiles, but by 1967, he was expanding into the insurance industry and other investments. Berkshire first ventured into the insurance business with the purchase of National Indemnity Company. In the late 1970s, Berkshire acquired an equity stake in the Government Employees Insurance Company (GEICO), which forms the core of its insurance operations today (and is a major source of capital for Berkshire Hathaway's other investments). In 1985, the last textile operations (Hathaway's historic core) were shut down. - Wikipedia

Today, Berkshire Hathaway will be added to the S&P 500 as a company now worth over $ 180 billion*. One of the five most valuable companies in the US.

In 1970, Berkshire Hathaway was earning less than $ 5 million/year with an intrinsic value = ~$ 50-60 million. 40 years later the company earns over $ 9 billion/year (from GEICO, Dairy Queen, See's Candy etc) and has over $ 140 billion in investments (primarily common stocks like Coca-Cola and miscellaneous bond holdings).

A total transformation.

That's investing. Turning a fragile business producing less than $ 5 million in earnings/year into the modern Berkshire Hathaway through smart allocation of capital over time.


* A market value that is arguably lower than its intrinsic value at this time
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Berkshire Hathaway Joins the S&P 500 Today
Berkshire Hathaway Joins the S&P 500 Today
Reviewed by jembe
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