The Industries that Made Warren Buffett Rich
Trying to duplicate Buffett’s success? Buy a business in one of these industries.
If you have even the slightest interest in stock, financial planning or investing, you are familiar with Warren Buffett and his fiscal powerhouse, Berkshire Hathaway. What started as a flailing textile mill has grown to a multi-industry conglomerate, with ringleader Warren Buffett boasting a net worth of over $71 billion, and no plans of slowing down. Hailed as the ‘Oracle of Omaha’, Buffett has used his financial prowess to build a massive empire through strategic investing, mergers and acquisitions, and economic analysis. Berkshire Hathaway is now the 5th largest company in the world, with Class A stocks selling for over $217,000 share – higher than any other stock on Wall Street.
Over the course of Buffett’s career, mistakes have been made, but they are far and few between. The majority of his investments have reaped him millions, and every day, Americans strive to duplicate his investment models. In every industry from candy to cars to steel manufacturing, all of Buffett’s investments have one thing in common – they’re stable and on track for growth. While not even the Oracle can predict the future, these 5 industries have proven to have been some of Buffett’s best investments of all time, making them great industries to purchase a business in. If you were going to take advice on buying a business from anyone, wouldn’t Warren Buffett be the guy?
As the textile boom started to fizzle, Berkshire Hathaway made its move into insurance and the returns have been plentiful. Berkshire Hathaway fully owns several insurance companies including Gen Re, National Indemnity and GEICO, the second largest auto insurance provider in America. GEICO collects $18 billion in insurance premiums annually, giving Berkshire Hathaway a reliable revenue stream since the mid 90’s when they first acquired it. Americans will always need to insure their assets, and as the average rate of disposable income continues to rise, this industry will remain stable and profitable for business owners. Insurance agencies are some of the most profitable (10.5% margins!) and sought-after businesses we list, many of them not even making it to the internet due to the influx of inquiries.
The Transportation and Logistics sector is slated to be one of the hottest industries for 2015, but Warren Buffett was onto this trend long before it made headlines. Back in 2009, Berkshire Hathaway fully acquired BNSF Railway, the 2nd largest freight line in North America. Since then, Buffett has expanded into the Transportation industry and acquired additional trucking companies, most notably, McLane Company, which did over $45 million in revenue last year. As a mega industry in the United States, trucking employees over 10 million people and is responsible for over $609 billion dollars in revenues. Buffett has sited Transportation and Logistics as a “recession-resistant” industry, largely due to the fact that 80% of all American communities rely on trucking for basic necessities such as fuel, food, etc., and rapid expansion in the food industry. High profits, “recession-resistance” and consistent consumer demand make Transportation and Logistics a great industry to purchase a business in.
Residential Real Estate
In 2002, Berkshire Hathaway began acquiring companies within the Residential Real Estate field and by 2012, Berkshire Hathaway HomeServices was founded. For the first time, Buffett used the Berkshire Hathaway name to break into an industry and even in the midst of the biggest economic recession we’ve seen since the Great Depression, HomeServices was successful. Since its inception, HomeServices has spent over $500 million in acquisitions, and Berkshire Hathaway has been buying stock in companies to compliment HomeServices’ offerings. Berkshire Hathaway owns more than $20 million in stock of Wells Fargo, which is the country’s biggest mortgage lender. Berkshire Hathaway also owns several carpet, brick, window treatment, and insulation companies as well as Clayton Homes, a major modular home manufacturer. The Berkshire Hathaway strategy of acquiring and expanding has reaped significant rewards, making this business modal a proven guide for business owners breaking into the Residential Real Estate industry.
Since the very beginning, Berkshire Hathaway has invested heavily into Manufacturing. Berkshire Hathaway has grown from a fledgling textile mill to owning more than 100 manufacturing companies, one of which is a conglomerate in itself and valued at over $7 billion – the Marmon Group. Berkshire Hathaway has invested in manufacturing businesses from every end of the spectrum, varying from clothing to jet airplanes. Currently, Berkshire Hathaway partially or wholly owns Fruit of the Loom, H.J. Heinz, and Acme Brick and also holds major stock in John Deere, General Motors, Precision Castparts, WABCO holdings. While some experts say that manufacturing can be a fickle business, Buffett has referred to it as an “excellent” industry to be in and one that has given him massive returns. Manufacturing offers several advantages to business owners including low labor costs, high efficiency, competitive advantages and massive room for expansion through M&A transactions.
Judging by Buffett’s past investments in the Energy/Utilities field, buying a business in this sector would be a wise choice for any entrepreneur. Starting in the late 1990’s, Berkshire Hathaway made it’s next “elephant” move into energy by purchasing MidAmerican Energy (now Berkshire Hathaway Energy), one of the largest energy suppliers in America. Buffett utilized his tried and true M&A grow strategy and expanded his Energy empire to include PacifiCorp, CalEnergy Transmission, AtlaLink, Suncor Energy, Chicago Bridge & Iron, and as of 2013, NV Energy. Since purchasing NV Energy, Buffett has predicted to invest more into the Energy each year, and spent around $15 billion in 2013 alone. Buffett has been known to spend his money in industries that are stable and trust-worthy, and judging by his investments, he is confident in the Energy/Utilities field. Buying a business in the Energy/Utilities field is a safe bet for buyers for two reasons; the wide variety of service offerings ensures a stable revenue stream, even if one offering happens to dip and because consumers will always need energy/utilities, creating a “recession-resistant” industry, according to Buffett.
Berkshire Hathaway has grown tremendously over the past 50 years and these 5 industries have helped catapult the conglomerate into a new realm of success. Each of these 5 industries has reaped Warren Buffet billions of dollars and as he continues to invest heavily in these fields, we can expect to see his fortune increase. If you have been thinking about starting or buying a business, these sectors are not only financially backed by the ‘Oracle of Omaha’, but statistically proven to be good investments due to high profits, recession stability, and expanding service offerings. To learn more about purchasing a business, check out our listings or Contact Viking today to plan for your future.