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The Background of Berkshire Hathaway Inc.

Oliver Chance had established Berkshire Hathaway, which was initially originated from a textile manufacturing company named as the Valley Falls Company. The first textile mill founded by him was in 1806. “In 1929 the Valley Falls Company merged with the Berkshire Cotton Manufacturing Company established in 1889”. Then the company was called Berkshire Fine Spinning Associates. Then again in 1955 Berkshire Fine Spinning Associates merged with Hathaway manufacturing Company.

In 1962, Warren Buffett started eventually buying the shares of the company and by 1967 had a majority stake in the company. He later started diversifying the company into manufacturing of furniture, candies, vacuum cleaners and in the sale of jewelry. The company has been following the philosophy of Value Investing (by Benjamin Graham, University of Columbia.) (Mahalo, 2009). The company shut its core operation, textile manufacturing, in 1985.

Analysis of Article

The given data depicts the performance of the Berkshire Hathaway company over the period of 44 years. The company's performance has ranged between the best returns in the year 1976 (59.3%), against the worst returns in the year 2008 with the lowest recorded return as -9.6%.2008 year has been the worst year not only for Berkshire Hathaway but also for S&P 500.

In the time period of 44 years, the book value has grown from 19$ to 70530$ at the rate 20.3 % compounded annually. The per share book value for class A and class B decreased by 9.6%. (Shim, 2000)

As calculated in the excel, the average returns over the period in 21.36%.The annual gains since 1965 is 20.47% and the overall gains is 362498.60%.

The data and the calculations show that Berkshire Hathaway has positive kurtosis which is 0.05. The skewness, It basically measures the distribution of the data, is right tailed so therefore it's positively skewed.

Comparison of Berkshire Hathaway's performance with S&P 500

The difference that we can clearly notice from the calculations and the data given is the annual and the overall gains of both the companies that Berkshire Hathaway's respective returns are better. The statistics for Berkshire Hathaway are annual gains since 1965 is 20.47% and over all gains is 362498.60% and for S&P500 are annual gains is 8.94% and over all gains is 4236.04%. The gains for Berkshire Hathaway are overall, considering both annual and overall gains, better.

Even the average returns for Berkshire Hathaway are almost 10% more than S&P 500's.The former has 21.35% and the latter has 10.51%.The Standard deviation of Berkshire Hathaway being 14.88% attracts the investors as compared to S&P 500 whose Standard Deviation is 17.95% because the figures shows that Berkshire Hathaway is less risky because more the standard deviation more will be the risk on the expected returns.

For both companies, 2008 has been the worst year as the data shows that both have got the least returns that is -9.6% and -37% for Berkshire Hathaway and S&P 500 respectively. But the best year for Berkshire Hathaway was 1976 with 59.3% returns and year 1995 with ...