While you’ve most certainly heard Warren Buffett dubbed as the Oracle of Omaha, you may not be familiar with some of the companies under his wing. Berkshire Hathaway is one such company. It ranked seventh in 2011 on Fortune’s list of the 500 largest companies boasting of $136 billion in revenues and $12 billion in profits (CNN Money). The company which is labeled as a conglomerate holding company got its start manufacturing textiles back in 1839. After a merger with Berkshire Fine Spinning Associates in 1955, Berkshire Hathaway was operating 15 plants with more than 12,000 workers; however, by the end of the 1950s, seven of these plants were closed (Wikipedia).
Warren Buffett. Photo by Mark Hirschey.
Buffett started purchasing stock in Berkshire Hathaway in 1962 after studying the stock price pattern following each subsequent plant closing. Only two short years later, he realized the textile business was not going to rebound so he accepted a verbal offer to sell the stock for a specific price. When Buffett received the agreement in writing, the seller was offering a slightly lower price per stock which is actually an eighth of a cent lower. Buffett, angry at the deception, refused to sell his shares instead bought up more of the company’s stock.
Although Buffett admitted in 2010 that had he sold the stocks and invested his money directly in insurance companies, he would have made more money; the company is ranked in the top 10 on the Fortune 500, up from number 11 in 2010. Berkshire Hathaway owns several companies including National Indemnity Company and GEICO. Even though Buffett could have made more money in the long-term if he sold, he stuck to his principles and did not accept a sneaky attempt at a lower offer on the Berkshire Hathaway. He also turned the company from a faltering textile manufacturer into a holding company with billions of dollars in revenue.