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Berkshire Hathaway: Investment Giant

July 13, 2015

Berkshire Hathaway is based in Omaha, Nebraska. It is an American multinational conglomerate holding company traded in the New York Stock Exchange and headed by world-famous investor Warren Buffet. While the company is known for its investment it started out in the textile business over a hundred years ago.

Oliver Chace founded Valley Falls Company in Valley Falls, Rhode Island in 1839. Valley Falls Company in 1929, merged with Berkshire Cotton Manufacturing Company founded in 1889, in Adams, Massachusetts. The merged company was called Berkshire Fine Spinning Associates. In 1955, Berkshire Fine Spinning Associates merged with the Hathaway Manufacturing Company, founded in 1888, in New Bedford, Massachusetts.

After the merger Berkshire Hathaway had 15 plants employing more than 12,000 workers with more than $120 million in revenue. The company was based in New Bedford. Business turned south and by the end of the decade, seven of the plants were closed, accompanied by large layoffs.

Warren Buffet came into the picture in 1962 when he began buying Berkshire Hathaway stocks after noticing the price direction of the stocks whenever the company closed a mill. Warren later came to the conclusion that the company was deteriorating. Searbury Stanton who ran the company made an oral tender in 1964, of $11 1/2 per share to buy back Warren’s share. Warren agreed. Warren received a few weeks later the written offer but the price was a lower $11 3/8. Warren was angered by this lower offer and instead of selling he began buying more shares to take control of the company to be able to fire Searbury and this he did.

Warren was now the majority owner of a textile business that was essentially floundering. The core business of textile was maintained by Warren, but by 1967 he was entering the insurance industry. This provide Berkshire with a major source of capital which would be parlayed into other investments.

The last textile operation was shut down in 1985. The other investments of Berkshire has been doing very well. In 2014, Berkshire recorded revenues of $194.672 billion with total assets of $526.186 billion.

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