Berkshire Hathaway’s (BRK.B) investments in manufacturing could yield results amid the push for the sector by the Trump administration in recent quarters. The administration has initiated trade wars with its allies and China in order to levy duties on regimes focusing on exports through unfair trade practices. This could allow domestic US manufacturers to expand their capacities for intermediates and commodities such as steel.
Berkshire Hathaway has maintained a significant stake in the manufacturing sector (VIS) over the years. The company has stakes in metals, chemicals, agriculture, and other industrials. In 4Q17, the segment posted a 9.6% rise in revenue to $13 billion. In 2018, the segment’s performance is expected to grow at a faster pace amid lower corporate tax rates and the expansion of its operating capacities.
Berkshire could also look to add more companies in the segment amid a rising cash pile and expected growth in consumer products, industrials, and consumer-driven companies. The company has recently added Duracell and Precision Castparts to its portfolio, which has helped aid in the overall growth of the segment.
Alternative and traditional asset managers (XLF) Morgan Stanley (MS), Goldman Sachs (GS), and BlackRock (BLK) have more of a preference for services, energy, technology, and related investments for generating long-term value.
The manufacturing sector has managed to improve operating margins in recent years. Berkshire’s manufacturing business posted earnings before tax of $1.4 billion, a rise of 35.1% compared to 4Q16, aided by acquisitions and economies of scale.
In 2017, the segment posted revenue of $50.0 billion with earnings before tax of $6.9 billion. Its profitability spiked on building products, consumer products, and industrial products.