Stansberry Research founder Porter Stansberry’s recent report about multinational conglomerate holding company Berkshire Hathaway was one that will surely be seen as controversial. This firm, and its CEO Warren Buffett, are very highly regarded in the business world. It is the third largest publicly traded company in the world, and the ninth largest conglomerate by revenue. Stansberry Research is a world-renowned financial advisory company that has proven to be quite accurate in the past. This company was founded in 1999 in Baltimore, Maryland, where they are still based.
According to this writer, Warren Buffett grew Berkshire Hathaway into a successful business by using an innovative and efficient business formula. The writer argues that, as long as the formula was followed, the business was extremely profitable. But he goes on to say that they have suffered a slight decrease in their fortunes of late, as a result of straying from the original formula.
That original formula worked like this: The company began by buying up insurance companies. Specifically, they would buy up P&C (Property and Casualty) insurance companies, and with those purchases they would also acquire a lot of “float” money. “float” money is cash that insurance companies hold in reserve from insurance premiums in order to pay claims. If the money is never paid out as a claim, the money simply remains as part of the “float” fund, and this money adds up over time. When Warren Buffett bought the first of these insurance companies, National Indemnity, he paid 8.6 million dollars. But along with this company, he also acquired 19.4 million dollars in float money. As of this writing, Buffet has now grown that original float fund to a worth of 114 billion dollars (Indeed).
This formula was effective because it gave Berkshire Hathaway access to huge amounts of investment capital without having to actually develop that capital on their own. thus, they always had more money to work with than other companies did, which was a tremendous advantage when making investments of any kind. The writer argues that the company has moved away from that model, instead choosing to acquire whole companies and to invest in high-risk and high-regulation markets.
Stansberry Research is a publisher of financial information and software, serving millions of investors around the world. Their team of financial analysts write a large number of articles intended to guide investors in the world of finance. Their software tools help an investor to stay updated on the ups and downs of various markets. People in over a hundred countries make use of their services on a regular basis. In addition to this, they organize conferences for investors and interested parties. Time will tell if this latest prediction will prove to be correct.