These numbers illustrate the magnitude of Buffett's achievement -- as well as the "Berkshire system."
As a boy, Berkshire Hathaway CEO Warren Buffett was obsessed with numerical data. You get some sense of this when you go through his annual letters to Berkshire Hathaway shareholders, which are peppered with statistics. The most recent letter, which celebrates 50 years of Buffett at the helm, is rich with numbers that illustrate how uncommon this conglomerate is — and how it was built to be different.
The miracle of compounding (but not at head office!)
|Value of $10,000 Invested at the Start of 1964|
|Berkshire Hathaway||S&P 500 Index (with dividends included)*|
|Compound annual gain||21.6%||9.9%|
Let’s look at some numbers that tell the Berkshire story, along with some quotes from Buffett.
$18.3 billion: Berkshire Hathaway’s increase in net worth during 2014. That gain in book value is greater than the book value of more than four-fifths of the companies in the S&P 500.
9 1/2: Number of Berkshire-owned businesses that would be listed on the Fortune 500 if they were independent — the “1/2″ refers to H.J. Heinz, which Berkshire owns with 3G Capital. (“That leaves 490 1/2 fish in the sea. Our lines are out.”)
340,499: Number of Berkshire Hathaway employees (including those at Heinz).
25: Number of people who work at Berkshire Hathaway’s headquarters (includes the chief executive officer and chairman).
Berkshire’s “Powerhouse Five” businesses
$12.4 billion: Pre-tax 2014 earnings of Berkshire’s “Powerhouse Five” — its five largest non-insurance businesses (Berkshire Hathaway Energy, BNSF, Iscar, Lubrizol, and Marmon).
$1.6 billion: Increase in Berkshire’s “Powerhouse Five” pre-tax earnings.
One: Number of “Powerhouse Five” businesses owned by Berkshire a decade ago (Berkshire Hathaway Energy, then known as MidAmerican Energy, which earned $393 million at the time).
$6 billion: The amount railroad operator BNSF expects to spend on capital investments in 2015 — 26% of estimated revenues!
15%: Percentage of all inter-city freight — whether it’s transported by truck, rail, water, air, or pipeline — carried by BNSF (“the most important artery in our economy’s circulatory system”).
Insurance: “Berkshire’s core operation”
“Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2014 — that makes 12 years in a row — and increased its float. During that 12-year stretch, our float — money that doesn’t belong to us but that we can invest for Berkshire’s benefit — has grown from $41 billion to $84 billion. Meanwhile, our underwriting profit totaled $24 billion during the twelve-year period, including $2.7 billion earned in 2014. And all of this began with our 1967 purchase of National Indemnity for $8.6 million.”
1 1/2: Length of contract, in pages, sealing Berkshire’s acquisition of National Indemnity and National Fire & Marine in 1967 for $8.7 million. (See for yourself: The purchase agreement is reproduced on pages 128-129 of the annual report — the link opens a PDF file.) Not surprisingly, no lawyers or investment bankers were involved in drafting or negotiating the contract.
$111 billion: National Indemnity’s net worth today, according to generally accepted accounting principles.
$22.7 billion: Amount paid out in claims by Berkshire’s insurance operations in 2014.
$7.1 billion: Single premium on a reinsurance policy written for Lloyd’s in 2007. (Berkshire Hathaway has written every property/casualty policy with a premium in excess of $1 billion — there have been eight of them.)
Odds and ends
$40.5 million: Sales at the Omaha Furniture Mart in the week surrounding the 2014 annual meeting — that’s roughly 4.5 times average weekly sales.
$30 million: The price Berkshire Hathaway paid for See’s Candy in 1972 — 7.5 times trailing pre-tax earnings.
$1.9 billion: See’s Candy’s cumulative pre-tax earnings since its acquisition.
$40 million: Aggregate incremental investment in See’s Candy required to produce those $1.9 billion in earnings.
45%: Approximate U.S. market share of Berkshire subsidiary Clayton Homes in manufactured homes.
13%: Clayton Homes’ market share in 2003, the year Berkshire acquired it.
$15.6 billion: The amount of capital Berkshire Hathaway extended to businesses in a three-week period during the height of the financial crisis, including $3 billion to General Electric GENERAL ELECTRIC COMPANY GE 0% , $5 billion to Goldman Sachs GOLDMAN SACHS GROUP INC. GS -1.43% and $6.5 billion to Wrigley.
$42 billion: Total unrealized gains at the end of 2014 on Berkshire’s “Big Four” equity investments — American Express, Coca-Cola, IBM and Wells Fargo.
$1.6 billion: Dividends received by Berkshire on its “Big Four” stocks in 2014.
$12.5 billion: Year-end value of Berkshire’s “phantom” stake in Bank of America. (Berkshire has the option to purchase 700 million shares of Bank of America before September 2021 at a cost of $5 billion, an option it expects to exercise just before its expiration. Money has a time value, after all — no sense in making the outlay today.) Berkshire will almost certainly become Bank of America’s largest shareholder, in addition to being Wells Fargo’s largest shareholder.
And the mistakes (there have been some doozies!)
$444 million: Berkshire’s after-tax loss on its investment in UK retailer/grocer Tesco.
$5.7 billion: Current value of Berkshire Hathaway shares that Buffett paid for the acquisition of Dexter Shoe (the 1993 purchase price was $433 million).
Zero: Current value of Dexter Shoe.
$50 billion: The minimum amount by which Berkshire Hathaway’s net worth would exceed its current value “if it had seized several opportunities it was not quite smart enough to recognize as virtually sure things,” according to Vice Chairman Charlie Munger’s estimate. Those mistakes include “not purchasing Wal-Mart stock when that was sure to work out enormously well.”
$100 billion or so: The amount “diverted … from BPL partners to a collection of strangers” by Buffett’s decision to acquire National Indemnity through Berkshire Hathaway rather than via Buffett Partnership Limited directly. BPL owned a 61% stake in Berkshire Hathaway — the “collection of strangers” Buffett refers to are Berkshire Hathaway’s then-minority shareholders.