During the Berkshire Hathaway Inc.’s annual meeting this last week in Omaha, Warren Buffett was asked by a shareholder, “What could cause the Berkshire Hathaway Inc.(NYSE:BRK.A)‘s Enterprises to not work? What concerns keep him up at night with Berkshire Hathaway?”
Important to Kill your Investments
When it comes to an investment it’s always important to consider what would take it down and cause a total loss no matter how unlikely the scenario may seem. When it comes to Berkshire Hathaway Inc.(NYSE:BRK.A) Berkshire Hathaway Inc.(NYSE:BRK.B), Warren and Charlie have built the entities with a wide variety of diversified income streams.
While your average company has a number of more typical economic risks an investor could center himself on, Buffett’s answer for Berkshire highlights the strength in the entity they’ve created. It reiterates the type of diversified battleship they’ve built up in Berkshire Hathaway Inc.
Berkshire is Highly Diversified
Berkshire Hathaway Inc is more diversified then your average company operating in spaces including: Diversified investments, Property and Casualty insurance, Utilities, Restaurant, Food processing, Aerospace, Media, Toys, Automotive, Sporting Goods, Consumer Products and Internet.
The company has been built to survive a variety of shocks based upon its diversified income stream and ample access to liquidity. In many panics or shocks the company will be able to use it’s cash flow and reserves to pounce on opportunity whether it be in financial markets, or in insurance markets.
Buffett’s Answer on What Could Take Down Berkshire
Buffett paused and thought opening with “infection, outside agent, invasion of different thought, and it’s the things you can’t think of.”
Then he expanded (and I paraphrase):
I can’t think of anything that can harm Berkshire in a material permanent way except weapons of mass destruction. A recession, depression, a panic, hurricanes, earthquakes, all would have effect. All would have some effect, and in same cases we’d do better. If there was a successful nuclear, biological cyber attack on the Untied States, it could disrupt society to such an extent it would harm us. I think with the variety of earnings streams, the general philosophies, we would be very close to the last one affected. If someone figures out how to kill millions of Americans and disrupt society then all bets are off.
Warren Buffett noted: “If that ever happens, there’ll be more to worry about than the price of Berkshire.”