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Could someone please explain the difference between the two?

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Comments (13)

  • GBB_19NHS's picture

    I am not sure on the exact legal structure of Berkshire Hathaway, but as far as I understand its not a limited partnership such as most PE firms but a holding company. It owns other companies outstanding stock etc. as opposed to making highly levered private equity investments. BH has traditionally used very little amounts of debt and oversees its investments as subsidiaries of the overall holding agreement. In addition they are incorporated and produce their own stock which can be bought.

    Any additional infos? I would be interested as well into more detail

    "too good to be true"

    See my WSO Blog

  • monkeysama's picture

    Well, I own KKR stock as well as Blackstone. But I imagine the most different thing is the investment philosophy. Most PE firms probably prowl for firms they can LBO and rip apart in order to sell underlying assets while BH is owned by the Sage, so he's looking for long term profit and wants to own the company.

    When Buffet starts investing in railroads it's a good time to buy railroads.

  • GBB_19NHS's picture

    True on the stock thing, haha that was a bit short sighted on my end (though KKR and BX are gradually developing into different entities than traditional PE firms). I think you are on the point on the whole investment philosophy, leverage and focus on long term vs. short term. I think though also the idea of how BH is set up, incorporated and structures its investments is different from a PE firm.

    "too good to be true"

    See my WSO Blog

  • StyleT's picture

    What do you think would be a good entry into the type of work that BH does? Im sure there have to be other companies doing the same thing. I mean according to all of the articles i have read about Warren Buffett and BH, It seems like all he did was start an investing partnership after being a stock broker...Correct me if i am wrong.

    But the main question is, what would be good entry point to eventually run a company similar to BH? Investment Banking? Asset Management? Something else?

  • tyrets's picture

    You're pretty much on point. He did start an investment partnership and then when he found BH he started accumulating it's stock and dwindled down its textile production. Now, it is pretty much a holding company and he invests the float from the insurance companies - which he started doing form day one.

    His big thing has, and always will be, based upon Graham value investing. He doesn't trade. He buys companies and sells them for absurd profits. When he starts buying stock he intention is to OWN the company.

    Roger Lowenstein (author of When Genius Failed) wrote a great biography of him. I suggest you read it if you're interested in Buffet and his background.

  • In reply to monkeysama
    TechBanking's picture

    Most PE firms probably prowl for firms they can LBO and rip apart in order to sell underlying assets

    Maybe in the 80's, but this isn't how most PE funds operate today. In fact, a lot of funds now buy a company as a platform investment and then buy other companies to bolt-on to it, basically the opposite of what you've suggested.

  • In reply to StyleT
    TechBanking's picture

    Im sure there have to be other companies doing the same thing.

    Biglari Holdings (Steak 'n Shake) is currently trying to pursue a Berkshire-like strategy.

  • alexpasch's picture

    Large family offices will have a strategy similar to BH (i.e. own some private companies, but also invest in stocks, etc.).

    A good entry point would be to go to IB or something like that, and transition to a family office or some other holding company-style investor.

    Consultant to a Fortune 50 Company

  • In reply to StyleT
    Mzz's picture

    So what do you all think a good entry point would be?

    Start a business, make some dough and start buying out other businesses for the long haul.
  • In reply to alexpasch
    StyleT's picture

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  • In reply to StyleT
    alexpasch's picture

    Consultant to a Fortune 50 Company