Macroeconomics, Insurance to Dictate Berkshire Hathaway's 2H17

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Part 5
Macroeconomics, Insurance to Dictate Berkshire Hathaway's 2H17 PART 5 OF 11

Berkshire Hathaway’s Manufacturing Push and Trump’s Policies

Back to basics

The Trump administration’s push toward manufacturing in a bid to revive growth in the United States and stricter rules on trade from China are signaling possible reverse globalization. On the other hand, China is targeting a consumption-based economy, which is serving well for countries running high deficits with the country. Berkshire Hathaway’s (BRK.B) interest in manufacturing has continued, even during the growth era of the service sector. The company could even seek more investments in the manufacturing space since policies are tilted toward higher growth.

Berkshire Hathaway&#8217;s Manufacturing Push and Trump&#8217;s Policies

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Berkshire’s major holdings in manufacturing and industrials (VIS) include the following:

  • Lubrizol, a global specialty chemical company
  • CTB, a manufacturer of industrial equipment for the agriculture sector
  • IMC (International Metalworking), a metal-cutting tools business
  • Precision Castparts, a manufacturer of metal products for aerospace, power, and other industrial markets

Global outlook

In the area of acquiring manufacturing businesses, Berkshire faces competition from corporates inside and outside the United States as well as asset managers (XLF) such as BlackRock (BLK), Goldman Sachs (GS), and Blackstone (BX). Berkshire’s manufacturing division managed a 4.4% top-line growth in 2Q17, totaling $12.7 billion, fueled by growth in industrial, building, and consumer products. The division posted before-tax earnings of $1.9 billion compared to $1.7 billion during the same period the prior year, reflecting strength across its three divisions. Berkshire’s retail business, McLane, managed revenues of nearly $12.6 billion.

In 2Q17, Berkshire’s industrial subdivision saw growth due to a 9.0% rise in IMC’s revenues. The subdivision contributes more than 50.0% of manufacturing’s total revenues. Building products revenues expanded largely due to the addition of Shaw and MiTek and sales volume increases. Consumer products revenues rose due to a 12.0% rise at Forest River and higher sales of Duracell.


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