Buffett’s Powerhouse: 5 Companies at the Heart of Berkshire Hathaway
There’s a lot to be said about business magnate Warren Buffett. As chair and chief executive officer of Berkshire Hathaway Inc. (NYSE:BRKA)(NYSE:BRKB) and a champion of common sense value investing, Buffett has earned himself a place in the pantheon of legendary business leaders. He has steered Berkshire through a dozen economic recessions and business crises, all the while guiding the value of Berkshire higher and higher. In his 2013 letter to shareholders, Buffett reported that the book value of Berkshire stock has increased at a compounded annual rate of 19.7 percent since 1965, soundly outperforming the 9.8 percent annual compounded gain of the S&P 500 including dividends.
In that same letter, Buffett revealed that the so-called ‘Powerhouse Five’ — “a collection of large non-insurance businesses” that together make up a cornerstone of Berkshire’s empire — had record pre-tax earnings of $10.8 billion. This is up about 7 percent from 2012, and in the coming year Buffett expects the earnings of the group to improve “perhaps by $1 billion or so pre-tax.”
But Buffett doesn’t have much more to say about the Powerhouse Five. The companies — MidAmerican Energy, BNSF Railway, Iscar, Lubrizol, and Marmon — aren’t often in the headlines despite their size, and Buffett generally only has high-level praise for them in public. Here’s an overview of those companies and how they fit into Berkshire’s growing empire.