A Fresh Peek at Berkshire Hathaway's Hot Portfolio and Valuations

(Continued from Prior Part)

Services and retailing

In 2015, Berkshire Hathaway (BRK-B) acquired Berkshire Hathaway Automotive and Detlev Louis Motorradvertriebs, expanding its services and retailing portfolio. The company’s service and retailing revenues increased to $6.2 billion in the third quarter of 2015, compared to $3.5 billion in the prior year’s corresponding quarter. The division’s profits rose to $378 million from $355 million during the same quarter of last year.

Revenues in this division climbed mainly due to the addition of new companies. Together, these companies added $2.5 billion in revenues. Excluding these acquisitions, revenues expanded in home furnishings retailers, driven by Nebraska Furniture Mart.

Diversified operations

Berkshire Hathaway operates many subsidiaries in the service and retail industry. Its major businesses include NetJets, a provider of fractional ownership programs for general aviation aircraft, and FlightSafety, a provider of high-technology training for aircraft operators. The following are some of its other businesses:

• TTI, an electronic components distributor

• Business Wire, a distributor of corporate news, multimedia, and regulatory filings

• Dairy Queen, which licenses and services a system of over 6,500 stores that offer prepared dairy treats and food

• Buffalo News and the BH Media Group, which includes the Omaha World-Herald, as well as 28 other daily newspapers and numerous other publications

• WPLG, which operates a television station in Miami, Florida

Finance and financial products

Berkshire Hathaway made some good investments in the financial sector during the 2007 crisis. The company generated heavy capital profits over a five- to seven-year period. The company’s division reported a rise in revenues from 8% to $1.7 billion during that period, mainly due to higher home unit sales. The division’s pretax earnings rose to $486 million from $453 million in the prior year’s quarter.

Berkshire Hathaway’s major subsidiaries in the segment include manufactured housing builder and financier Clayton Homes, transportation equipment manufacturing and leasing businesses UTLX and XTRA, as well as other leasing and financing businesses. XTRA owns and leases over-the-road trailers. UTLX manufactures, owns, and leases railcars, intermodal tank cars, and cranes.

Operating margins of Berkshire Hathaway and peers

Berkshire Hathaway reported an operating margin of 14.4%. By comparison, its competitors reported the following margins:

• American International Group (AIG) reported 15.5%.

• Metlife (MET) reported 13.7%.

• Allstate (ALL) reported 11.9%.