doesn't have a conference call where investors can sit and listen
to what Warren Buffett and his management team think about the
last three months, but a dive into the latest SEC filing reveals
five critical things investors need to know.
There may be no elephants, but one business has been
Many -- including
-- have wondered what big business, which Buffett affectionately
refers to as an "elephant," will be the next big acquisition by
Berkshire. And as the days go by, it seems one possible place may
be the energy sector through the newly
Berkshire Hathaway Energy (
What makes me say that? Consider these two quotes:
On December 19, 2013, BHE acquired NV Energy, ("NV Energy")
for cash consideration of approximately $5.6 billion.
On May 1, 2014, BHE entered into a Share Purchase Agreement
to acquire 100% of AltaLink, L.P. ... for an estimated cash
purchase price of C$3.2 billion (approximately $3.0 billion as
of June 30, 2014).
AltaLink is an electricity transmission business in Canada,
and NV Energy is an electric company serving more than 1.2
million customers in Nevada.
In fact, Buffett recently said Berkshire has "poured billions
and billions and billions of dollars" into his energy business
and said "we're going to keep doing that as far as the eye can
With all that in mind, it's becoming clearer Buffett thinks
the energy sector is full of opportunities to expand Berkshire's
GEICO continues to deliver
Premiums earned [at GEICO] in the second quarter and first six
months of 2014 increased $484 million (10.5%) and $969 million
(10.8%), respectively, compared to premiums earned in the same
periods in 2013.
Much has been
about GEICO, but the undeniable fact is the first six months of
2014 has marked another incredible start from GEICO. As you can
see, its premiums earned -- the revenue it brings in -- is up
more than 40% since 2010:
Source: Company SEC filings.
And not only are its premiums earned up 11% over last year,
but its losses are down, and so too are its everyday expenses. As
a result, through the first six months of the year, GEICO's
profits are up 24%, to stand at nearly $750 million.
All of this is to say, GEICO has clearly continued its
Diversity isn't everything; it's the only thing
Unsurprisingly, the Service segment of Berkshire Hathaway has had
a solid first half of the year, with its profits rising nearly
14% to stand at $605 million. But one thing that must be seen
about this business is the wide range of companies that actually
make it up:
Our service businesses include
, the world's leading provider of fractional ownership programs
for general aviation aircraft and
, a provider of high technology training to operators of
aircraft. Among the other businesses included in this group
, a leading electronic components distributor;
, a leading distributor of corporate news, multimedia and
, which licenses and services a system of over 6,300 stores
that offer prepared dairy treats and food;
BH Media Group
("BH Media"), which includes the
, as well as 29 other daily newspapers and numerous other
publications; and businesses that provide management and other
services to insurance companies.
I have long applauded the
array of businesses of Berkshire Hathaway for the purposes of
investors, and this doesn't just come from the broader segments
that make it up -- insurance, railroad, utilities, energy,
manufacturing, service, retailing, finance, and financial
products -- but the businesses within the businesses!
There is perhaps no clearer example of the diversity of
Berkshire Hathaway than its Service segment.
Things haven't been great for one business
When discussing the operations of Burlington Northern Santa Fe,
Berkshire's railroad, the filing noted:
During the second quarter of 2014, our volumes increased but
service levels continued to be well below our internal
standards, as well as those expected by our customers. As a
result, we continued to experience operating inefficiencies. We
are working diligently to promptly address these service
In the business spanning 28 states, the total revenue was up
by $576 million, or 5% through the first six months of the year,
but thanks to heightened expenses across the board, its net
earnings fell by $42 million. It is never encouraging to see
gains in revenue be outpaced by expenses.
Source: Flickr / roy.luck.
Although the release notes it is actively working to "expand
capacity," in an effort to "improve and maintain service levels,"
and six difficult months shouldn't be discouraging to investors,
the fact remains that BNSF represents nearly 25% of the operating
business income at Berkshire, so monitoring its results are
Berkshire is getting bigger and bigger
The highlights of the Manufacturing business of Berkshire, which
brought in more than $18 billion in top-line revenue, added an
Also included are the diversified manufacturing operations
of Marmon, which were previously presented separately, together
with its transportation equipment manufacturing, repair and
All of this is to say, Marmon is no longer shown as an
individual business, but instead part of the broader
manufacturing operations of Berkshire.
While the exact reason for this isn't noted, it's fascinating
to consider that Berkshire feels it isn't essential to disclose
the business that brought in more than $3.5 billion in revenue
through the first six months of last year.
The results of Marmon are later discussed, but the fact
remains, it's seemingly no longer considered to be an essential
cog in the Berkshire wheel. This likely isn't the result of its
failures, but instead Berkshire's success, as Marmon's size isn't
considered "material" to the core results.
We may know Berkshire Hathaway is an enormous company, but
instances like this reveal exactly how large it truly is.
The Foolish bottom line
Although investors may not have calls to listen in on or earnings
presentations to review at Berkshire, there are undoubtedly
important things to learn from the SEC filings it produces. And
while Buffett may not have said it himself, 2014 undoubtedly look
like it is off to a solid start for Berkshire Hathaway.
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new market, which experts say
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5 Things Berkshire Hathaway Inc.'s Management
Wants You to Know
originally appeared on Fool.com.
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