The Big, Bad Berkshire Hathaway Inc. (BRK.A) Bear

That gets to the other point: Consider Berkshire, the blue-chip private equity. As a consequence of its gilt-edged balance sheet, Berkshire’s endowed with an elephant gun that would make Dwight Eisenhower shiver. Its size has made many investments inconsequential, but it’s opened an entirely different class — which most investors cannot access. This, coupled with it laissez-faire oversight of its operating businesses, make it a logical provider of capital to blue chips seeking capital in times of distress — or managers looking to sell — as it has for H.J. Heinz Company (NYSE:HNZ). Or Burlington Northern Santa Fe. Or Goldman Sachs Group, Inc. (NYSE:GS). My wild-eyed guess on Buffett’s next white whale investment? Mondelez International Inc (NASDAQ:MDLZ). It’s a page straight from Buffett’s playbook, possessing pricing power, scale, and enduring brands.

3. Buffett’s Siren Song
Sad as it is, Buffett won’t run Berkshire Hathaway Inc. (NYSE:BRK.A) one day. And folks posit that returns are likely to suffer, or that it won’t attract the same caliber of operating subsidiary. These things might happen. But it doesn’t seem to me to be as huge an issue as purported. For one, operating businesses are now a very significant contributor to Berkshire’s earnings. Likewise, it could be argued that Berkshire’s most important asset is not Buffett, but its balance sheet. To the extent the right leaders are put in place, and they, too, conduct themselves with integrity and aplomb, the opportunity still exists. Is it a lock? Of course not. But when it comes to business and investing, few things are.

Yet again, a little context: At current prices, we’re paying 17.5 times trailing earnings from Berkshire’s operating businesses. If Berkshire earned just a 3% after-tax return on its $185 billion cash and investments, that number plummets to 11. That’s the long way of saying that Berkshire’s going to be just fine.

In short, I don’t worry too much about Berkshire, and I’m happy to be returning to Omaha for this annual rite of passage, once again. We’ll see those of you that make it there, and for those who can’t, look for Foolish coverage at .

The article The Big, Bad Berkshire Bear originally appeared on Fool.com is written by Michael Olsen, CFA.

Michael Olsen, CFA owns shares of Berkshire Hathaway. The Motley Fool recommends Berkshire Hathaway, Goldman Sachs, and H.J. Heinz Company. The Motley Fool owns shares of Berkshire Hathaway.

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