You'll Never Guess The Newest "Jewel" in Berkshire Hathaway's crown
“Berkshire will always be building.”
So said Warren Buffett in his latest annual letter to Berkshire Hathaway shareholders in February. Most people might imagine he means adding to Berkshire’s dozens of company holdings or the $144 billion in cash he calls a “financial fortress.”
But he was actually referring to clean energy. Buffett has had exposure to clean energy since the early 2000s, and in last year’s letter, he called it one of the “four jewels” of Berkshire Hathaway.
A 30-fold Increase From Going Green
Berkshire Hathaway has dozens of stakes in various companies, from Coca-Cola to American Express. But the firm has four main engines for growth, according to Buffett.
He explained them in detail in his 2020 letter. The first engine is Berkshire’s stake in Apple, which made $100 billion just a few years after Buffett purchased shares.
There’s Berkshire’s 100% ownership of BNSF Railway – America’s biggest railroad measured by freight volume. It’s paid over $40 billion in dividends to Berkshire.
The third engine is Berkshire’s property and casualty insurance business, National Indemnity. In the same 2020 letter, Buffett called National Indemnity “the engine propelling Berkshire’s growth since 1967.”
Finally. Berkshire Hathaway Energy forms what Buffett called “our final giant.”
BHE is a utility company that Buffett acquired back in 2000. It was a very different kind of utility firm back then. As Buffett said last year, “The company had no wind or solar generation in 2000. It was then regarded simply as a relatively new and minor participant in the huge electric utility industry. BHE has become a utility powerhouse (no groaning, please) and a leading force in wind, solar and transmission throughout much of the United States.”
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Buffett trumpeted the fact that BHE earned a record $4 billion in 2021. He noted it was a more than 30-fold increase from the $122 million BHE generated in 2000.
With a holding this size, Berkshire Hathaway could be considered a clean energy play. However, it’s out of reach of most investors – Class A shares of Berkshire are trading at $469,000 per share because Buffett is reluctant to authorize stock splits.
Investors seeking to ride an ongoing clean energy boom have several more affordable options. The exchange-traded fund (ETF) Invesco Solar, for example, contains a basket of solar companies. And investors with higher risk tolerance could consider pure play avenues in the startup world. YouSolar is pioneering an advanced solar nano-grid to allow customers to go solar with minimal inconvenience or disruption. The company’s fully-integrated power grid will allow households to retain power even amid blackouts of the conventional power grid.
For now, YouSolar serves high-income households in Northern California. But that could quickly change as massive incentives for solar power generation transform households, businesses and government agencies throughout America.
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