...Berkshire Hathaway Berkshire Hathaway is a holdings company operated by Warren Buffett and Charles Munger. The company was founded in the 1800’s as a textile mill, and through a series of mergers became known as Berkshire Hathaway. Buffett took control of the company in the 1960’s and transformed it from a failing textile mill into a very successful holdings company. Berkshire Hathaway’s main investments are insurance companies such as GEICO, financial institutions such as Wells Fargo, goods companies such as Coca-Cola, and newspapers such as The Washington Post. The company’s financial situation is very strong, with increasing assets, equity, and revenue. The company has several large competitors such as The Allstate Corporation and BlackRock, Inc., as well as many others. However, Berkshire constantly outperforms not only its competitors, but also the market. Berkshire Hathaway is a holdings company that owns businesses in a variety of business activities. The company was founded in 1839 as a textile mill known as The Valley Falls Company and through a series of mergers became known as Berkshire Hathaway. Warren Buffett, the world’s greatest investor, started buying stock in the company in 1962 (Finkle 2010). By the mid 1960’s, Buffett owned enough of the company to change the management and basically take control of the company. Buffett realized that the textile industry was in a decline, so he used the company as an investment vehicle in addition to its textile...
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...Buffett worked from 1951 to 1954 at Buffett-Falk & Co. as an investment salesman; from 1954 to 1956 at Graham-Newman Corp., as a securities analyst; from 1956 to 1969 at Buffett Partnership, Ltd. as a general partner and beginning in 1970 as Berkshire Hathaway Inc Chairman and CEO. By 1950, at 20, Buffett had made and saved $9,800 (over $96,000 inflation adjusted for the 2014 USD[22]).[23] In April 1952, Buffett discovered that Graham was on the board of GEICO insurance. Taking a train to Washington, D.C. on a Saturday, he knocked on the door of GEICO's headquarters until a janitor admitted him. There he met Lorimer Davidson, Geico's Vice President, and the two discussed the insurance business for hours. Davidson would eventually become Buffett's lifelong friend and a lasting influence,[24] and would later recall that he found Buffett to be an "extraordinary man" after only fifteen minutes. Buffett wanted to work on Wall Street, however, both his father and Ben Graham urged him not to. He offered to work for Graham for free, but Graham refused.[25] Buffett returned to Omaha and worked as a stockbroker while taking a Dale Carnegie public speaking course.[26] Using what he learned, he felt confident enough to teach an "Investment Principles" night class at University of Nebraska-Omaha. The average age of his students was more than twice his own. During this time he also purchased a Sinclair Texaco gas station as a side investment. However, this was not successful.[citation...
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...Buffett, the chairperson and chief executive officer (CEO) of Berkshire Hathaway Inc., announced that MidAmerican Energy Holdings Company, a subsidiary of Berkshire Hathaway, would acquire the electric utility PacifiCorp. In Buffett’s largest deal since 1998, and the second largest of his entire career, MidAmerican would purchase PacifiCorp from its parent, Scottish Power plc, for $5.1 billion in cash and $4.3 billion in liabilities and preferred stock. “The energy sector has long interested us, and this is the right fit,” Buffett said. At the announcement, Berkshire Hathaway’s Class A shares closed up 2.4% for the day, for a gain in market value of $2.17 billion.1 Scottish Power’s share price also jumped 6.28% on the news2; the S&P 500 Composite Index closed up 0.02%. Exhibit 1 illustrates the recent share-price performance for Berkshire Hathaway, Scottish Power, and the S&P 500 Index. The acquisition of PacifiCorp renewed public interest in its sponsor, Warren Buffett. In many ways, he was an anomaly. One of the richest individuals in the world (with an estimated net worth of about $44 billion), he was also respected and even beloved. Though he had accumulated perhaps the best investment record in history (a compound annual increase in wealth for Berkshire Hathaway of 24% from 1965 to 2004),3 Berkshire paid him only $100,000 per year to serve as its CEO. While Buffett and other insiders controlled 41.8% of Berkshire Hathaway, he ran the company in the interests of all shareholders...
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...Dhaka Prepared By: Md.Tazul Islam Roll:133 Batch:46D Date of Submission: 11-12-2011 Executive Summary: Warren Buffett is considered as one of the most successful investors of the market. A man who started his journey as an investor at the age of 13, continued to cross hurdles of his business carrier. It's annual report season, which includes announcements from the CEO and/or chairman of every public U.S. company. Given that Warren Buffett, the chairman of Berkshire Hathaway, is the most successful investor of all time, you might expect that a 23-page communication from him would be jargon-packed and over most people’s heads. In actuality, Buffett's annual letter to shareholders is famously down-to-earth, conversational, and witty. Never mind for now the specific points he makes: how he communicates his message is a lesson for all of us. Warren Buffett writes his letter to shareholders as a letter to his sisters - then crosses out "Dear Doris and Bertie" and replaces it with "To the Shareholders of Berkshire Hathaway". It’s not enough that Warren Buffett has become one of the richest men in the world. He’s also a world-class communicator – and nowhere does this gift go on public display more than in his annual letter to shareholders, to the CEOs and the public events that he attends like auction event, different functions. And all these activities offer terrific lessons for startup ventures in shaping their communications. Lesson No. 1: One Must Converse Like a Real...
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...Berkshire Hathaway AFIN250 Monday 5pm Christopher Lam 43820832 Savneet Kambo 44677987 Jason Weng 43885772 Table of Contents Executive Summary ............................................................................................................................2 Culture, a catalyst for Berkshire’s success ...........................................................................................2 Heir to Berkshire Hathaway ...............................................................................................................3 Graham & Dodd valuation model .......................................................................................................3 Bruner’s Disaster Framework, a risk assessment tool ..........................................................................4 Diversification of Berkshire Hathaway ................................................................................................5 Volatility timing .................................................................................................................................6 Conclusion .........................................................................................................................................7 Appendix ...........................................................................................................................................8 Reference ..........................................................................
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...Berkshire Hathaway and GEICO Insurance © 2001 Tim Glowa White Paper: Examining Berkshire Hathaway’s 1995 Purchase of GEICO Insurance Tim Glowa Tim@Glowa.ca September 12, 2001 © 2001 Tim Glowa September 12, 2001 -1- Berkshire Hathaway and GEICO Insurance Table of contents © 2001 Tim Glowa Executive Summary.................................................................................................... 3 Introduction................................................................................................................. 4 Review of the case: Berkshire Hathaway purchasing GEICO.................................... 4 Strategic Outcome....................................................................................................... 7 Finance........................................................................................................................ 7 Time Value of Money................................................................................................. 8 Assessment of the GEICO purchase ........................................................................... 8 Time value of money ................................................................................................ 11 An examination of the GEICO acquisition in hindsight........................................... 13 Limitations of Discounted Cash Flow ...................................................................... 15 Limitations of this Analysis ...
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...Case Study 2: Warren E. Buffett, 1995 This case was prepared by Professor Robert F. Bruner as the basis for classroom discussion rather than to illustrate effective or ineffective handling of an administrative situation. On August 25, 1995, Warren Buffett, the CEO of Berkshire Hathaway, announced that his firm would acquire the 49.6 percent of GEICO Corporation that it did not already own. The $2.3 billion deal would give GEICO shareholders $70.00 per share, up from the $55.75 per share market price before the announcement. Observers were astonished at the 26 percent premium that Berkshire Hathaway would pay, particularly since Buffett proposed to change nothing about GEICO, and there were no apparent synergies in the combination of the two firms. At the announcement, Berkshire Hathaway’s shares closed up 2.4 percent for the day, for a gain in market value of $718 million.1 That day, the Standard & Poor’s 500 index closed up 0.5 percent. The acquisition of GEICO renewed public interest in its architect, Warren Buffett. In many ways he was an anomaly. One of the richest individuals in the world (with an estimated net worth of about $7 billion), he was also respected and even beloved. Though he had accumulated perhaps the best investment record in history (a compound annual increase in wealth of 28 percent from 1965 to 1994),2 Berkshire Hathaway paid him only $100,000 per year to serve as its CEO. Buffett and other insiders controlled 47.9 percent of the company, yet Buffett...
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...Advantage Anything that prevents a business’ extraordinary return on capital from being whittled down to mediocrity by the ravages of competition. Where a business enjoys a durable competitive advantage it is said to have a franchise. Sometimes, a business will have a durable competitive advantage without earning an extraordinary return on capital in the aggregate. In a few cases, a business will have a durable competitive advantage without earning an extraordinary return on capital in any line of business. It is even possible for a currently unprofitable business to have a durable competitive advantage. But, this is a very special case. For instance, an unprofitable business may have a durable competitive advantage if it is the low – cost operator in an inefficient, highly fragmented industry, if and only if, the sole cause of unprofitability is inadequate sales volume. This is most likely to be true in an industry where efficient, low cost operations can only be carried out after a substantial infrastructure investment and can not be sustained at a low sales volume. In such a case, it would not be surprising to see the established, efficient (and unprofitable) business secure a dominant share of the fragmented industry and earn an extraordinary return on capital once sales volume has increased. Where a marginal sale is ridiculously profitable, advertising costs will serve to entrench the position of the business with the highest volume and the lowest costs. ...
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...AVOIDING INVESTMENTS IN FRAUDULENT COMPANIES: THE WORLDCOM FRAUD Introduction The purpose of this report is to investigate and discuss the accounting fraud that occurred at WorldCom in order to recommend improved strategies to Berkshire Hathaway’s management for avoiding investments in companies with fraudulent financials. Accounting fraud is a crime committed by high level employees at an organization to manipulate the organization’s financial statements and intentionally disguise company performance. The fraud is committed without the knowledge of owners (shareholders and investors) to benefit the individuals perpetrating or committing the fraud and results in a negative impact on the owners. This report will give a brief background on WorldCom and the telecommunications industry, and then discuss the details of the WorldCom accounting fraud in order to provide relevant recommendations to Berkshire Hathaway, Inc. for mitigating future losses due to investing in fraudulent companies. We expect management to become more knowledgeable regarding high fraud risk investments and therefore make better informed investment decisions. Recommendations to Berkshire Hathaway include improving current risk assessment procedures and enhancing investment policies. WorldCom and the Telecommunications Industry WorldCom was the leader of the telecommunications industry during the 1990’s; in 2000, WorldCom was the 25th largest company in the world (Anderson, 2013, p. 48). The...
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...| | |Contact details: | |Lara Samuels, Head’s PA, | |Castlewood Road, New Barnet, EN4 9GE | |T - 020 8344 2220 | |F - 0871 918 2214 | |recruitment@jcoss.barnet.sch.uk | | | |JCoSS is committed to safeguarding and promoting the welfare of children and young people and expects all its staff and volunteers to share this | |commitment. All postholders are subject to satisfactory enhanced Disclosure and Barring...
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...The Essays of Warren Buffett: Lessons for Corporate America Essays by Warren E. Buffett Selected, Arranged, and Introduced by Lawrence A. Cunningham Includes Previously Copyrighted Material Reprinted with Permission THE ESSAYS OF WARREN BUFFETT: LESSONS FOR CORPORATE AMERICA Essays by Warren E. Buffett Chairman and CEO Berkshire Hathaway Inc. Selected, Arranged, and Introduced by Lawrence A. Cunningham Professor of Law Director, The Samuel and Ronnie Heyman Center on Corporate Governance Benjamin N. Cardozo School of Law Yeshiva University © 1997; 1998 Lawrence A. Cunningham All Rights Reserved Includes Previously Copyrighted Material Reprinted with Permission TABLE OF CONTENTS INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROLOGUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 27 I. CORPORATE GOVERNANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . A. B. C. D. E. Owner-Related Business Principles................ Boards and Managers............................. The Anxieties of Plant Closings An Owner-Based Approach to Corporate Charity. A Principled Approach to Executive Pay.......... 29 29 38 43 47 54 II. CORPORATE FINANCE AND INVESTING. . . . . . . . . . . . . . . . A. B. C. D. E. F. G. H. I. 63 Mr. Market........................................ 63 Arbitrage......................
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...The Essays of Warren Buffett: Lessons for Corporate America Essays by Warren E. Buffett Selected, Arranged, and Introduced by Lawrence A. Cunningham Includes Previously Copyrighted Material Reprinted with Permission THE ESSAYS OF WARREN BUFFETT: LESSONS FOR CORPORATE AMERICA Essays by Warren E. Buffett Chairman and CEO Berkshire Hathaway Inc. Selected, Arranged, and Introduced by Lawrence A. Cunningham Professor of Law Director, The Samuel and Ronnie Heyman Center on Corporate Governance Benjamin N. Cardozo School of Law Yeshiva University © 1997; 1998 Lawrence A. Cunningham All Rights Reserved Includes Previously Copyrighted Material Reprinted with Permission TABLE OF CONTENTS INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . PROLOGUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 27 I. CORPORATE GOVERNANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . A. B. C. D. E. Owner-Related Business Principles................ Boards and Managers............................. The Anxieties of Plant Closings An Owner-Based Approach to Corporate Charity. A Principled Approach to Executive Pay.......... 29 29 38 43 47 54 II. CORPORATE FINANCE AND INVESTING. . . . . . . . . . . . . . . . A. B. C. D. E. F. G. H. I. 63 Mr. Market........................................ 63 Arbitrage......................
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...Berkshire’s Corporate Performance vs. the S&P 500 Annual Percentage Change in Per-Share in S&P 500 Book Value of with Dividends Berkshire Included (1) (2) ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ........................................................ ...................................
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...The importance of trust in states and firms Name: Han Xu CPR no.: 231092-3616 Date of submission: 11 January 2014 Study programme: BSc. Business Administration and Sociology Integrated assignment Supervisors: Jacob Lyngsie, Benedikte Brincker STU Count: 8102 This essay will focus determining if trust is indeed fundamental, or necessary to every organisation. Since trust usually suggests a relationship between 2 or more parties, the essay will look into how trust is established between organisation and define trust. Later on, the economic benefits of trust will be explained and lastly, the importance of trust will be evaluated. Trust and the state The Corruption Perception Index (CPI) is an The CPI is an example of measuring a state’s economic legitimacy based on an empirical understanding, seeking to shed light on the economic and political legitimacy of a regime by reviewing international institutions’ perception on the transparency and corruption of the state. Every year, Transparency International releases a CPI report on countries around the globe. The annual report (Transparency International 2013) measures countries according to the perceived level of corruption, reflecting the level of trust in the accountability of each state. In this section of the essay, we point our attention to the state and trust is defined as the ‘belief in legitimacy’ (Rostboll 2013). Such formalised documentation of trust between neutral international institutions and...
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...Fourth Edition Financial & Managerial Accounting for MBAs Peter D. Easton Robert F. Halsey Mary Lea McAnally Al L. Hartgraves Wayne J. Morse Cambridge Business Publishers To my daughters, Joanne and Stacey —PDE To my wife Ellie and children, Grace and Christian —RFH To my husband Brittan and my children Loic, Cindy, Maclean, Quinn and Kay. —MLM To my wife Aline. —ALH To my family and students. —WJM Cambridge Business Publishers FINANCIAL & MANAGERIAL ACCOUNTING FOR MBAs, Fourth Edition, by Peter D. Easton, Robert F. Halsey, Mary Lea McAnally, Al L. Hartgraves, and Wayne J. Morse. COPYRIGHT © 2015 by Cambridge Business Publishers, LLC. Published by Cambridge Business Publishers, LLC. Exclusive rights by Cambridge Business Publishers, LLC for manufacture and export. ALL RIGHTS RESERVED. No part of this publication may be reproduced, distributed, or stored in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Student Edition ISBN 978-1-61853-102-5 Bookstores & Faculty: to order this book, call 800-619-6473 or email customerservice@cambridgepub.com. Students: to order this book, please visit the book’s website and order directly online. Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1 About the Authors ...
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