Berkshire Beyond Buffett(8)

Berkshire’s insurance sector consists of large companies that underwrite personal car insurance (e.g., GEICO) as well as large business risks (e.g., Gen Re and NICO), along with a dozen smaller operations engaged in a wide variety of insurance, running the gamut from boats to workers’ compensation. All in all, the sector insures just about everything you could think of—from your neighbor’s car to urban skyscrapers, from the café down the block to the world’s largest airlines.

Berkshire’s second business sector, regulated or capital-intensive industries, involves two distinct business activities. One is energy and consists solely of Berkshire Hathaway Energy (formerly known as MidAmerican Energy), a global conglomerate invested in energy, including solar and wind, and interests in natural gas pipelines. The other is transportation, headlined by Burlington Northern Santa Fe, among the largest North American railroads. Berkshire’s transportation interests also include two aviation specialists: FlightSafety, which provides pilot training, and NetJets, the pioneer in fractional aircraft ownership. Berkshire’s transportation sector also includes Forest River, manufacturer of boats and recreational vehicles.

Berkshire’s finance sector encompasses three companies, whose financing operations may be similar but whose products differ substantially: Clayton Homes, a builder, seller, and financier of manufactured housing; CORT, which leases furniture; and XTRA, a lessor of trucking equipment.

The final sector—the one Fechheimer and Scott Fetzer occupy—includes eight subdivisions. The subdivisions contain similar types of business activity yet broad variety. For example, both See’s and Dairy Queen are part of the food sector, but the business models of these two companies differ markedly, See’s being a chain of company-owned stores and Dairy Queen a system of franchises.

Berkshire’s jewelry subdivision includes three retailers, Ben Bridge Jewelers, Borsheim, and Helzberg Diamonds, and also a manufacturer and wholesaler, Richline. The home furnishings subdivision parallels this, consisting of four kindred retailers, Jordan’s Furniture, Nebraska Furniture Mart, RC Willey Home Furnishings, and Star Furniture, but also a manufacturer of picture frames, Larson-Juhl. Similarly, the media sector includes scores of local newspapers like the Buffalo News, the Omaha World-Herald, and the Richmond Times-Dispatch, along with an international press release service called Business Wire.

Berkshire’s construction subdivision produces building materials (Johns Manville), bricks (Acme), paints (Benjamin Moore), and steel connectors (MiTek). The apparel sector subsidiaries, Brooks, Fruit of the Loom, Garan, H.H. Brown Shoe, and Justin Brands, together offer nearly every kind of footwear—cowboy boots, dress shoes, work boots, golf shoes, and running shoes—as well as athletic gear, children’s clothing, intimate apparel, and the uniforms of Fechheimer.

The sales subdivision is a hodgepodge of companies distributing electronics (TexTronics Inc. or TTI), kitchen utensils (the Pampered Chef), and party favors (Oriental Trading). Finally, the industry subdivision includes an agricultural equipment manufacturer (Chore-Time Brock or CTB), a specialty chemical maker (Lubrizol), and a global metal cutting powerhouse (Israel Carbide/International Metalworking Companies or ISCAR/IMC), along with conglomerates Scott Fetzer and the Marmon Group.

Berkshire’s diversity by business line is matched by diversity in almost every measurable category—acquisition price, valuation, dollar contribution to Berkshire, firm size, employment base, and various financial characteristics. Having all these companies under one roof, so to speak, a degree of homogeneity might be expected, such as a uniformly low price-to-book ratio, following Buffett’s original investment philosophy, or a maximum price-to-earnings ratio, applying conventional value-investing filters. This is not the case at all. Unifying traits and commonalities at Berkshire will not be found in such metrics, but rather in more intangible features.




Berkshire’s 1986 payments of $46 million for Fechheimer and $315 million for Scott Fetzer foretold of the wide-ranging acquisition prices it would pay over the ensuing decades. During the first ten years that followed, Berkshire’s acquisition prices ranged from less than $100 million to $2.3 billion for the consolidation of GEICO. Over the next twenty years, the scale increased and the range widened, with many deals between $400 and $900 million, several more than $1 billion, and a handful more than $10 billion (see table 2.1).


Table 2.1

Acquisition Prices

($ billion) ($ million)

44 Burlington Northern Santa Fe (BNSF) 800–900s Fruit of the Loom, Pampered Chef, TTI