Since the 2007 crisis, Berkshire Hathaway has grown continuously, with revenues totaling $194.7 billion. Its operations have expanded at 9% over the past five years. Its earnings have expanded at a CAGR (compound annual growth rate) of 11%, mainly on growth in its manufacturing, servicing, railroad, and insurance businesses. The company’s investment and derivative gains have remained in the $2 billion to $6 billion range with one exception—2011, when it reported a loss of $830 million.
Berkshire Hathaway has expanded its balance sheet at a CAGR of 9% over the past five years. The company’s total assets are now $526 billion compared to $372 billion in 2010.
Berkshire’s leverage has improved marginally and is comfortable overall. Its current debt-to-equity ratio is 0.33x compared to 0.37x in 2010. The company is less leveraged than its peers in the insurance sector such as Allianz (ALV), American International Group (AIG), and Metlife (MET). All of these companies are part of the iShares Core S&P 500 ETF (IVV).
At its existing size, Berkshire Hathaway (BRK-B) is expected to grow its cash reserves by 5% to 9% over the next few years. Growth will depend upon how much diversification the company seeks and to what degree it expands its portfolio outside of the US. In the past five years, Berkshire and the S&P 500 (SPY) have expanded at 79% and 73%, respectively, reflecting a higher correlation.
In the past few decades, Berkshire Hathaway has expanded at a faster rate than other managers including Blackstone (BX), BlackRock (BLK), Goldman Sachs (GS), and Morgan Stanley (MS). Together, these companies make up 5.93% of the Financial Select Sector SPDR Fund (XLF).