Tuesday, 28 April 2015

Buffett Octopus is Berkshire

Berkshire Hathaway is like a eight legged octopus with its main businesses separated into two portfolios; 1. Operating businesses and 2. Investments. Each of the portfolio carries different businesses feeding into Berkshire HQ where Warren's appetite for cash allows him to satisfy his capital allocation strategy.

The eight legs of Berkshire if I had it to sum would be:
  1. Insurance (Geico inter alia)
  2. Media (Washington Post inter alia)
  3. Manufacturing (
  4. Utility (Mid America Energy inter alia) 
  5. Transportation (BNSF Railway)
  6. Home Services
  7. Finance and Investment
  8. Franchise Operations
  9. Real Estate ( Warren's extra teeth or leg up)
All these businesses form the foundation of Berkshire's cash generating machine and each employee is like a suction cup gathering cash for Berkshire HQ the supreme conglomerate.

This business model has made many copycats, but nobody does it quite like Warren Buffett. He has made Berkshire Hathaway a mega octopus sucking up cash anywhere it exist while staying within his circle of competence. 

Focus InSight: The key strategy in a great business is finding businesses with cash run off for capital allocation in other generating units.

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Feel free to ask questions and make comments.