Commentary: Think Berkshire Hathaway Is Diversified? You Don’t Know The Half Of It

(BRK.A), (BRK.B)

“Where can I find a list of Berkshire Hathaway’s companies?” It is a frequent question.

As someone that spends a good bit of time writing about Berkshire Hathaway’s companies, I can tell you that I’ve never seen a consolidated list of all of Berkshire’s wholly-owned companies. (This is distinct from the companies like Amex, or Coca-Cola that are in Berkshire’s stock portfolio.) Yes, there is a list of companies on Berkshire’s website, but it does not truly give you the picture of all the company that the conglomerate owns.

First, because Berkshire not only owns a lot a stand-alone companies, some of which everyone knows (BNSF, GEICO, NetJets, Dairy Queen), and others that are far less familiar (Mouser Electronics, Berkshire Hathaway E-Supply) but they also own other holding companies, such as Marmon Holdings, Richline Group, IMC International Metalworking Companies, and Scott Fetzer.

Marmon, for example, owns over 100 manufacturing companies. These are not little mom and pop shops, but major manufacturing companies in their own right. For example, Marmon owns Cornelius, the billion dollar worldwide leader in beverage dispensers. Go into a fast food restaurant, hotel breakfast bar, or gas station that has a fill-a-cup dispenser and it likely says Cornelius.

And second, because so many of Berkshire’s companies own other companies.

You may have heard of Richline Group, but have you heard of DRL Manufacturing S.A., located in San Pedro, Dominican Republic? It’s a jewelry manufacturing company with 800 employees.

Or take a look at McLane Company. In 2012, McLane acquired Meadowbrook Meat Company (a $6 billion foodservice distributor with 3,300 employees.) But that’s just the tip of the iceberg. Some of Berkshire’s companies’ companies own companies. Yes, that’s not a typo.

Speaking of McLane Company, McLane owns wine and spirits distributor Empire Brands, and Empire Brands acquired Horizon Wine & Spirits Inc. So, Berkshire owns McLane, which owns Empire Brands, which owns Horizon.

You can call them divisions or subsidiaries, but they were often stand-alone businesses when they were acquired by one of Berkshire’s companies.

Let me give you one more example of this. Berkshire owns Fruit of the Loom, and mentions them in the annual report. However, that’s just the start for understanding what Berkshire owns with Fruit of the Loom.

In 2006, Fruit of the Loom acquired Russell Brands. At the time, Russell Brands owned Russell Athletic, Brooks Running, and Spalding, among other brands. So, when you see a Spalding basketball, you are actually seeing a product of a wholly-owned Berkshire company, even though when you go to the bottom of the Spalding website it just mentions Russell Brands, LLC.

While much of the press focus with Berkshire Hathaway is whether or not Warren Buffett has acquired an “elephant” (a giant-sized acquisition), yet every year Berkshire spends billions acquiring more companies through bolt-on acquisitions to its existing companies.

This is a very wise approach, as Berkshire’s managers know what is additive to their companies. And, if Buffett agrees that this is a good use of capital, they strengthen their respective companies through acquisitions.

Note to Berkshire shareholders, this is why the Berkshire you own now is even better than the Berkshire you owned ten years ago. Its companies have continued to make meaningful acquisitions that expand their operations.

Take Clayton Homes, the leader in mobile, modular and manufactured homes. In 2016 Clayton acquired Goodall Homes, in 2018 they acquired Arbor Homes (Indianapolis’s largest home builder), and in 2019 they acquired Highland Homes. So, now Clayton is not only the leader in mobile homes, but also a growing player in site-built homes, as well.

Sometimes the acquisitions are phased in. Right now, Berkshire is a minority owner of Pilot Company, the leading supplier of fuel and the largest operator of travel centers in North America. In 2020, Berkshire will become the majority owner, and whenever you stop at a Pilot Travel Center, Pilot Food Mart, or a Flying J gas station, you will be at a Berkshire Hathaway company. But even that won’t tell you the full story on Pilot, as Pilot acquired Equipment Transport, LLC, a wellsite services company, and also runs the fourth-largest tanker fleet in the U.S.

Berkshire and its companies are like a giant nesting doll. Open one and there is often another inside.

The point of all this is that Berkshire Hathaway is not just diversified, it is really, really diversified.

© 2020 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.