Summarize Berkshire Hathaway’s investment strategy. (You’ll need to look at Warren Buffett’s annual report for this information). What types of companies do they seek? What type of companies do they tend to avoid?

Answer:

Berkshire Hathaway's reputation in the investment world is huge. This is mainly because of the investments that the company did and they had good returns for these companies. The strategy that is used to determine such companies and evaluate such companies based on certain internal metrics that are designed to unearth high potential companies is not so saturated markets. If we look at the accounting information of Berkshire Hathaway's we can understand that they are not very much different or extraordinary strategies or businesses in which they have invested. They have a set of principles and they walk on those to ensure they are investing in the best company for their portfolio of investment.

The investment strategy by Berkshire Hathaway is to invest into stocks that are low at the status quo but has high potential to grow. Also, it is necessary that the business of the company is understandable and we are able to make sense of the business. It is only when you understand the business you invest in it otherwise they would not invest in a high potential business if they have no knowledge about that business. Hence, invest where you know things is one simple strategy that they follow. Because they invest only in businesses they know and understand it becomes easy for them to monitor their shares and investments and take timely actions.

The kind of companies that Berkshire Hathaway seeks is the ones whose business is understandable by the company. The company is working in competitive markets and the market is set to grow. The company should have robust business operations and the ability to scale when the time comes and lastly the management capabilities of the company. There are the attributes they seek for in a company and based on these parameters they choose their investment. They generally tend to avoid businesses where they are not clear about the business and its market.

Hence, this is an overall brief about Berkshire Hathaway's investment strategy.