What Is Berkshire Hathaway?

Berkshire Hathaway is a company led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved in multiple industries and faces different competitors. In the diversified holding sector, Berkshire competes against challengers such as Leucadia National Corporation (LUK). Because many of its assets are insurance subsidiaries, Berkshire Hathaway is also a rival of large insurance firms such as The Allstate Corporation. Berkshire is sometimes considered a management investment company, competing with players like Blackrock, Inc. (BLK), and a private equity firm, contending with the likes of KKR & Co. LP.

Key Takeaways:

  • Berkshire Hathaway is a company led by renowned investor Warren Buffet.
  • The company invests in insurance, private equity, real estate, food, apparel, and utilities.
  • Some of Berkshire Hathaway's competitors are Leucadia National Corporation, The Allstate Corporation, Blackrock, Inc. (BLK), KKR & Co. LP.
  • Investors in Berkshire Hathaway include Bill Gates, founder and former CEO of Microsoft Corporation, and Mexico's Carlos Slim.


Understanding Berkshire Hathaway

Warren Buffett is Berkshire Hathaway's main investor and serves as chairman and CEO. The publicly traded company's many other investors include billionaires such as Bill Gates, founder and former CEO of Microsoft Corporation, and Mexico's Carlos Slim. Beyond insurance, the company's holdings range across the food, apparel, and utilities sectors. Other assets include jewelers and furniture retailers.

Competitors to Berkshire Hathaway

Leucadia National Corporation is a competitor for Berkshire Hathaway where investments are concerned. With a similar business model Leucadia is often called the "Baby Berkshire." Leucadia's stock is worth less and it has nowhere near the holdings that Berkshire Hathaway possesses, Leucadia is successful at acquiring promising assets at less than fair value, and building their long term growth.

Leucadia relies strongly on its major business, the Jefferies Group investment banking firm, acquired in 2012. Leucadia also owns National Beef, the fourth-largest beef processor in the United States, and Garcadia, the nation's 15th-largest auto dealer. Leucadia has other holdings in the restaurants and telecommunications sectors. The company is also a 50% owner in a joint venture with Hathaway Berkshire for real estate lending.

Insurance

Berkshire Hathaway relies heavily on its investments in the insurance business. The company competes through its Geico Corporation holding in some of the same personal insurance lines as Allstate, such as auto and property insurance. The holding company's other insurance assets include reinsurance giant General Re and National Indemnity, a specialist in insuring commercial drivers such as truck and taxi drivers.

Investment Management

Although Berkshire Hathaway is not officially a management investment company, it effectively plays in this space by selling and managing a portfolio of securities for its investors. Blackrock is the world's largest public investment firm with an impressive $6.84 trillion in assets. Unlike Berkshire Hathaway, however, Blackrock does not participate in proprietary trading.

Also, Blackrock's customer base is limited to institutional and retail investors, such as pension plans, mutual funds, insurance companies, and charities. Like other management investment firms, Blackrock provides formal mechanisms that allow investors to pool their capital with that of other investors to purchase professionally managed groups of diversified securities.

Private Equity

Some might not view Berkshire Hathaway as a private equity firm; however, reports say private equity titan Henry Kravis once referred to Berkshire as "the perfect private equity model," due to its massive amounts of cash and publicly traded shares for acquisitions. Kravis co-founded KKR, a highly substantial player in the private equity sector.

In fact, much like KKR and other private equity companies, Berkshire Hathaway is indeed a source of investment capital from wealthy individuals and institutions for investing in and acquiring equity ownership in companies. However, private equity firms tend to be more direct about raising these funds and managing the money to ensure positive returns for shareholders.