Yesterday, the second edition of The Complete Financial History of Berkshire Hathaway was released.

One of the more unusual additions is the story of Berkshire’s acquisition of Pilot Flying J: a staged purchase, pushdown accounting, litigation, a countersuit, and a settlement before trial. Oh, and incredible insight into Berkshire’s purchase framework.

Below are two pages from the new edition.

…

…

Buy The Book Here

Praise for the 2nd Edition

“If you want to understand how Warren Buffett built Berkshire Hathaway into one of the most valuable businesses in the world, you have to read this book. This is your opportunity to stand beside Picasso as he paints each brush stroke. A must read for all Buffett and Berkshire groupies.”

- Bill Ackman, Founder and CEO of Pershing Square

“I and my teammates at the Gabelli Organization have been tracking Warren’s success for some 50 years. Adam’s book captures the work and highlights the history of Berkshire and the hard and diligent work of Buffett and Munger, Jain and Abel, and Combs and Weschler.”

- Mario Gabelli, Chairman and CEO, Gabelli Funds

“Adam Mead’s discussion of the values and virtues which have shaped Berkshire Hathaway over 50 years is a must read for those investors in search of the forces that have delivered such investment value over time.” – Thomas A. Russo, Gardner Russo & Quinn LLC

“Few activities can be more rewarding for any value investor than studying the history and evolution of Warren Buffett and Berkshire Hathaway. Adam has done us a huge favor with his yeoman efforts in producing this treatise. Since it is chronologically ordered, it is an invaluable reference guide for all things Berkshire.” — Mohnish Pabrai

“Adam continues to deliver a resource very valuable to both Berkshire fans and the investor community as a whole, his depth of knowledge is clearly demonstrated here again. I thoroughly enjoyed this latest addition.” - Dan Calkins, Chairman & CEO, Benjamin Moore

“The question must be asked, ‘Why another Berkshire book?’ When you read this monumental effort by Adam Mead, the answer will be obvious. Read cover to cover, both the uninitiated to Berkshire and its most ardent followers will derive enormous utility and satisfaction from it. I learned so many new and important things about Berkshire and its history. It is my pleasure to encourage you to enjoy this gem.”

- Christopher P. Bloomstran

“Whatever Adam writes is always first-class - guaranteed.

-Andy Kilpatrick, Author, Of Permanent Value: The Story of Warren Buffett

“With this project, Adam has done a wonderful job extending the Berkshire Classroom by providing a comprehensive analysis of the rich corporate history and unique entrepreneurial leadership.” — Mac Sykes, Gabelli Funds

“Adam Mead’s The Complete Financial History of Berkshire Hathaway is the definitive history of Berkshire. While there have been countless books written about Warren Buffett’s investment approach, none have so meticulously documented Berkshire’s capital allocation decisions from the very beginning. The depth of research is staggering, transforming the complex and sometimes chaotic story of how a small textile mill became a financial conglomerate into a clear, year-by-year narrative of every significant investment and acquisition. In this updated edition, Adam carries the narrative through Berkshire’s sixth decade and the methodically planned leadership transition to Greg Abel. For students of business history, this is an indispensable resource.”

-Patrick Gaughen, President and Chief Operating Officer, Hingham Institution for Savings

“The definitive story of Berkshire Hathaway—how Buffett and Munger turned a failing textile mill into one of history’s greatest wealth-creating enterprises, with timeless lessons in business, investing, and leadership.”

-Vitaliy Katsenelson, CEO of IMA, Author of Soul in the Game

“Berkshire Hathaway is a company with few, if any, parallels in business history. Under the leadership of Warren Buffett, it was transformed from a New England textile mill that would ultimately be shuttered to a sprawling conglomerate with a market valuation of more than $1 trillion. With this updated edition of “The Complete Financial History of Berkshire Hathaway”, Adam provides a thorough review of the key decisions that created the modern Berkshire Hathaway, an outcome inextricably tied to the investment and business wisdom of Warren Buffett and his business partner, Charlie Munger. In a few hundred pages, Adam adeptly runs through six decades of Berkshire’s history. For Buffett and Munger fans who want to truly understand how Berkshire was created, this book is a must read.”

- Alex Morris, Founder of TSOH Investment Research and the Author of Buffett & Munger Unscripted

“A meticulous chronicle of Berkshire Hathaway’s remarkable final act under Buffett’s leadership. Mead’s granular analysis of Buffett’s capital allocation decisions—from the $78 billion in share repurchases to the masterful Apple investment—provides unmatched insight into how the world’s most successful conglomerate navigated unprecedented scale and succession challenges.”

-Tobias Carlisle, Portfolio Manager, Acquirers Funds®

“This exceptional history of Berkshire Hathaway will appeal to history buffs, finance enthusiasts, and investing professionals alike. Mead combines rigorous research with remarkably clear storytelling, tracing the company’s ascent from a struggling textile mill to one of the world’s most admired conglomerates. The book is impressively detailed yet fully accessible—equally valuable for students learning the foundations of investing and for seasoned professionals looking to deepen their understanding of Berkshire’s evolution.”

-Gillian Zoe Segal

“With his ability to make complex things seem simple, Warren Buffett made the difficult work of building Berkshire Hathaway look easy. With this excellent history, Adam Mead takes us behind the scenes to see the details of how that work happened and was so successful. For anyone interested in Berkshire Hathaway, or the development of American capitalism, this is essential reading.”

- Bryan Lawrence, Founder, Oakcliff Capital

“There is simply no book that details the economic lore of Berkshire Hathaway better. A true exposé that every intelligent investor should read.”

- Gwen Hofmeyr, Founder, Maiden Financial

“The most comprehensive book on Berkshire Hathaway that has ever been written. It belongs on the shelf of every business enthusiast!”

-Andrew Wagner, Author of the Economics of Online Gaming and Founder & Chief Investment Officer of Wagner Road Capital Management

“Adam’s accounting of the Financial History of Berkshire is like candy for Finance and Business Junkies alike. It’s a must read if you’re interested in studying the greats.”

- Carter Johnson, Managing Partner, Singleton Valuations

“I thought nothing else of value could be written about Warren Buffett. I was wrong. Adam’s detailed chronology of Berkshire’s evolution reveals the successes and failures of Warren in a unique and digestible way. A worthwhile read for every Buffett scholar, amateur and professional alike.” — Drew Estes, Banyan Capital

“Mead has done the Berkshire faithful an incredible service by stitching together the narrative and numbers so tightly, you can see the compounding in action—updated and genuinely useful.”

-Jacob Taylor, CEO of Baserate

“Adam Mead’s work reminds us that true value is found not just in numbers, but in the lasting quality where few care to linger. By doing exceptional due diligence his book clones the lessons of Warren and Charlie.”

-Jeff Gilbert

Adam Mead’s updated “Complete Financial History of Berkshire Hathaway” is a book like no other—chronicling six decades of evolution while reminding us that Berkshire, though Buffett’s masterpiece, remains subject to constant change—an indispensable addition to any serious investor’s bookshelf.

-Bogumil Baranowski, Founder of Blue Infinitas Capital, Author of “Money, Life, Family”, Host of Talking Billions Podcast

The Second Edition Is Here

Today is release day for the second edition of The Complete Financial History of Berkshire Hathaway.

The first edition covered Berkshire’s history through 2019. This new edition updates the story through 2025, a period that included the pandemic, inflation, a return to more normal interest rates, the Apple investment becoming even more central to Berkshire’s results, the Japanese trading house investments, Alleghany, Pilot, Berkshire Hathaway Energy, large-scale repurchases, and finally Warren Buffett’s retirement announcement at the 2025 Annual Meeting.

That announcement was the real impetus for this edition. I was in Omaha when Buffett made it, and I immediately felt that the final brushstrokes of his Berkshire masterpiece needed to be put down in writing before the next meeting.

Here are two excerpts from the new material:

Buy The Book Here

Thank you to everyone who read the first edition, gave feedback, shared it, or stopped me in Omaha to talk Berkshire. That feedback helped shape this second edition.

I’m excited to finally have it out in the world.

Praise for the 2nd Edition

“If you want to understand how Warren Buffett built Berkshire Hathaway into one of the most valuable businesses in the world, you have to read this book. This is your opportunity to stand beside Picasso as he paints each brush stroke. A must read for all Buffett and Berkshire groupies.”

- Bill Ackman, Founder and CEO of Pershing Square

“I and my teammates at the Gabelli Organization have been tracking Warren’s success for some 50 years. Adam’s book captures the work and highlights the history of Berkshire and the hard and diligent work of Buffett and Munger, Jain and Abel, and Combs and Weschler.”

- Mario Gabelli, Chairman and CEO, Gabelli Funds

“Adam Mead’s discussion of the values and virtues which have shaped Berkshire Hathaway over 50 years is a must read for those investors in search of the forces that have delivered such investment value over time.” – Thomas A. Russo, Gardner Russo & Quinn LLC

“Few activities can be more rewarding for any value investor than studying the history and evolution of Warren Buffett and Berkshire Hathaway. Adam has done us a huge favor with his yeoman efforts in producing this treatise. Since it is chronologically ordered, it is an invaluable reference guide for all things Berkshire.” — Mohnish Pabrai

“Adam continues to deliver a resource very valuable to both Berkshire fans and the investor community as a whole, his depth of knowledge is clearly demonstrated here again. I thoroughly enjoyed this latest addition.” - Dan Calkins, Chairman & CEO, Benjamin Moore

“The question must be asked, ‘Why another Berkshire book?’ When you read this monumental effort by Adam Mead, the answer will be obvious. Read cover to cover, both the uninitiated to Berkshire and its most ardent followers will derive enormous utility and satisfaction from it. I learned so many new and important things about Berkshire and its history. It is my pleasure to encourage you to enjoy this gem.”

- Christopher P. Bloomstran

“Whatever Adam writes is always first-class - guaranteed.

-Andy Kilpatrick, Author, Of Permanent Value: The Story of Warren Buffett

“With this project, Adam has done a wonderful job extending the Berkshire Classroom by providing a comprehensive analysis of the rich corporate history and unique entrepreneurial leadership.” — Mac Sykes, Gabelli Funds

“Adam Mead’s The Complete Financial History of Berkshire Hathaway is the definitive history of Berkshire. While there have been countless books written about Warren Buffett’s investment approach, none have so meticulously documented Berkshire’s capital allocation decisions from the very beginning. The depth of research is staggering, transforming the complex and sometimes chaotic story of how a small textile mill became a financial conglomerate into a clear, year-by-year narrative of every significant investment and acquisition. In this updated edition, Adam carries the narrative through Berkshire’s sixth decade and the methodically planned leadership transition to Greg Abel. For students of business history, this is an indispensable resource.”

-Patrick Gaughen, President and Chief Operating Officer, Hingham Institution for Savings

“The definitive story of Berkshire Hathaway—how Buffett and Munger turned a failing textile mill into one of history’s greatest wealth-creating enterprises, with timeless lessons in business, investing, and leadership.”

-Vitaliy Katsenelson, CEO of IMA, Author of Soul in the Game

“Berkshire Hathaway is a company with few, if any, parallels in business history. Under the leadership of Warren Buffett, it was transformed from a New England textile mill that would ultimately be shuttered to a sprawling conglomerate with a market valuation of more than $1 trillion. With this updated edition of “The Complete Financial History of Berkshire Hathaway”, Adam provides a thorough review of the key decisions that created the modern Berkshire Hathaway, an outcome inextricably tied to the investment and business wisdom of Warren Buffett and his business partner, Charlie Munger. In a few hundred pages, Adam adeptly runs through six decades of Berkshire’s history. For Buffett and Munger fans who want to truly understand how Berkshire was created, this book is a must read.”

- Alex Morris, Founder of TSOH Investment Research and the Author of Buffett & Munger Unscripted

“A meticulous chronicle of Berkshire Hathaway’s remarkable final act under Buffett’s leadership. Mead’s granular analysis of Buffett’s capital allocation decisions—from the $78 billion in share repurchases to the masterful Apple investment—provides unmatched insight into how the world’s most successful conglomerate navigated unprecedented scale and succession challenges.”

-Tobias Carlisle, Portfolio Manager, Acquirers Funds®

“This exceptional history of Berkshire Hathaway will appeal to history buffs, finance enthusiasts, and investing professionals alike. Mead combines rigorous research with remarkably clear storytelling, tracing the company’s ascent from a struggling textile mill to one of the world’s most admired conglomerates. The book is impressively detailed yet fully accessible—equally valuable for students learning the foundations of investing and for seasoned professionals looking to deepen their understanding of Berkshire’s evolution.”

-Gillian Zoe Segal

“With his ability to make complex things seem simple, Warren Buffett made the difficult work of building Berkshire Hathaway look easy. With this excellent history, Adam Mead takes us behind the scenes to see the details of how that work happened and was so successful. For anyone interested in Berkshire Hathaway, or the development of American capitalism, this is essential reading.”

- Bryan Lawrence, Founder, Oakcliff Capital

“There is simply no book that details the economic lore of Berkshire Hathaway better. A true exposé that every intelligent investor should read.”

- Gwen Hofmeyr, Founder, Maiden Financial

“The most comprehensive book on Berkshire Hathaway that has ever been written. It belongs on the shelf of every business enthusiast!”

-Andrew Wagner, Author of the Economics of Online Gaming and Founder & Chief Investment Officer of Wagner Road Capital Management

“Adam’s accounting of the Financial History of Berkshire is like candy for Finance and Business Junkies alike. It’s a must read if you’re interested in studying the greats.”

- Carter Johnson, Managing Partner, Singleton Valuations

“I thought nothing else of value could be written about Warren Buffett. I was wrong. Adam’s detailed chronology of Berkshire’s evolution reveals the successes and failures of Warren in a unique and digestible way. A worthwhile read for every Buffett scholar, amateur and professional alike.” — Drew Estes, Banyan Capital

“Mead has done the Berkshire faithful an incredible service by stitching together the narrative and numbers so tightly, you can see the compounding in action—updated and genuinely useful.”

-Jacob Taylor, CEO of Baserate

“Adam Mead’s work reminds us that true value is found not just in numbers, but in the lasting quality where few care to linger. By doing exceptional due diligence his book clones the lessons of Warren and Charlie.”

-Jeff Gilbert

Adam Mead’s updated “Complete Financial History of Berkshire Hathaway” is a book like no other—chronicling six decades of evolution while reminding us that Berkshire, though Buffett’s masterpiece, remains subject to constant change—an indispensable addition to any serious investor’s bookshelf.

-Bogumil Baranowski, Founder of Blue Infinitas Capital, Author of “Money, Life, Family”, Host of Talking Billions Podcast

In Case You Missed It: Pool Corp. First Look

In case you missed it just hours ago…not Wednesday… It’s been a busy week here at Watchlist Investing. I thought I’d scheduled my Wednesday post only to find it still sitting in drafts. Oops!

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The Des Moines operator gets the keys…

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This is Part 2 in my series, A Timelapse of the Tech Sector. Catch up if you missed Part 1…

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Chris Bloomstran on Excess Returns Podcast

This week in Berkshire History

No historical news this week. However…

I’m happy to report that Berkshire selected my book to be among those sold at next week's annual meeting. Check out the full selection.

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Disclosure: None

Diving In

I thought it was about time to take a look at Pool Corporation. Berkshire Hathaway first disclosed a stake in the pool products distribution business in Q3 2024, and upped it to a 9.2% stake in August 2025. Shares currently trade at $231 compared to Berkshire’s estimated average cost of $320.

Said differently, Berkshire’s average price implies a market cap of about $12 billion compared to today’s $8.1 billion, a drop of about a third.

What’s In A Name?

Pool Corporation distributes … pool supplies. Well, mostly. Its primary business is that of distributing swimming pool supplies, equipment, and related products, with a smaller (~8% revenues) portion derived from its landscaping and irrigation business.

The company operates 456 sales centers and distributes its products through five networks: SCP Distributors, Superior Pool Products, Horizon Distributors (irrigation/landscaping), National Pool Tile, and Sun Wholesale Supply.

Pool Corp sits between 120,000 wholesale customers (pool service contractors, builders, retailers, etc.) and 3,500 suppliers, although its three largest suppliers accounted for 43% of COGS (20%, 12%, and 11%).

Some stats about Pools’ pool business and the industry:

• Pool Corp Product Breakdown:

  • 64% recurring maintenance and repair of existing installed pools

  • 22% pool remodeling, renovations, and upgrades

  • 14% from new pool construction

• Pool Corp Geographic Breakdown:

  • 95% of sales in the US

  • 57% of 2025 sales in the sunbelt states of California, Florida, Texas, and Arizona

• There are 14 million swimming pools and hot tubs in the US, including 5.5 million in-ground pools

• The pandemic led to a surge in installations, rising from about 60,000 new installs per year to 100,000 at the peak. The pandemic surge increased the installed base by about 5%

  

• Pool Corp is the largest wholesale distributor of pool supplies in the world. It doesn’t disclose market share; however, it is thought to have a market share of between 25% and 35% of between $15 and $20 billion of industry sales.

A Short History of Pool Corp

• 1981: Founded by Frank St. Romain and Richard Smith in New Orleans, Louisiana

• 1993: Partnered with private equity to form SCP Pool Corporation

• 1995: IPO

• 1999: Manuel “Manny” Perez de la Mesa named CEO

• 2005: Entered the irrigation and landscaping business with the acquisition of Automatic Rain Company aka Horizon for $87 million

• 2008: Acquired National Pool Tile for $28.9 million

• 2019: Manny steps down as CEO and is replaced by Peter Arvan who joined the company in 2017

• 2021: Acquisition of Porpoise Pool & Patio for $788.7 million brought Sun Wholesale Supply servicing Pinch A Penny franchise locations, significantly expanding the company’s distribution and retail support capabilities.

Management / Ownership

Peter Arvan: As noted above, Arvan joined Pool Corp in 2017. Previously, he was the CEO of BrightSpring Health Services. He was tapped as CEO in 2019. Arvan was paid a base salary of $900,000 and earned $6.6 million of total compensation in 2025.

Directors earn total fees of about $250,000 per year.

Former CEO, Manuel Perez de la Mesa owns about 3% of the company.

As of the 2026 proxy:

• Berkshire Hathaway owned 8%

• Kayne Anderson Rudnick Investment Management owned a 5% stake

Financial Analysis

One glance at the income statement and it’s clear that Pool has grown tremendously.

Sales grew from $2.25 billion in 2014 to $3.2 billion in 2019 (a 7% CAGR) before nearly doubling to $6.2 billion in 2022.

Thank the pandemic for the surge in at-home spending and the related product shortages that allowed a temporary surge in margins (just look at that bump in the second chart below).

Additionally, Pool acquired Porpoise/Sun Wholesale in December 2021, resulting in a structural increase in its distribution capabilities.

Working Capital

Pool Corp’s working capital structure is a function of its distribution model. The company carries significant inventory (purchased from manufacturers, including early-buy pre-season inventory) financed in part by accounts payable to those manufacturers.

The structural shift toward more working capital as a percentage of sales is a function of a few things:

1. Pre-pandemic increase in SKUs, sales center growth, and early buy program (where Pool buys inventory ahead of time from suppliers at a discount)

2. Product shift toward equipment/building products

3. Pandemic spike

4. Drawdown to a post-pandemic plateau reflecting the above factors (more SKUs and broader geographic footprint), in part from the Porpoise acquisition in late 2021.

Balance Sheet & Capital Allocation

Pool took on debt to fund the Porpoise acquisition in 2021. From a traditional debt to equity/capital/tangible capital, leverage has remained flat. However, debt now stands at a somewhat worrisome 7.5x EBIT.

Over the last 10 years (2016-25), Pool:

• Spent 11% of cash flow from operations on capex, including 3% on growth

• 26% spent 26% on acquisitions, with the largest being Porpoise ($788.7MM) and four tuck-in acquisitions in 2020

• 53% on net share repurchases

• 30% on dividends

• Funded by $866 million (22% OCF) of new debt

I’m wary of management taking on debt to fund big share repurchases when the balance sheet is already moderately encumbered.

Here’s an interesting chart from the 2025 annual report showing the company’s uses of cash since inception.

Return on Capital

Pool generates very strong returns on total and tangible capital, although those returns have come down from their post-pandemic peaks.

In the working capital section, I noted that Pool’s capital investment appeared structurally higher. I wonder if that means capital turnover will cap at about 2.0x. Similarly, margins would appear to be normalizing around 11%. If those two factors hold, then pre-tax return on total capital will stabilize around 20%. At 3.0x for tangible capital turnover, pre-tax return on capital would be 30%.

Valuation

Read more

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BRK 2026 - Events

The Berkshire AGM is approaching fast! This will be my 13th year attending in person in Omaha. You can find me at the Gabelli panel (Friday), at VALUExBRK (Friday), and signing copies of my book at The Bookworm inside the arena. If you see me please say hello!

This week in Berkshire History

April 15, 1977: Blue Chip Stamps acquires The Buffalo Evening News for $35.5 million.

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Note: This is the second in a series of “how-to” posts exploring the investment process.

Why Most Investors Waste Time on Bad Ideas

My Experience Finding Medifast

Last week, I wrote about the problem of filtering. Here, I want to show how that process worked in practice using Medifast, a company I eventually added to my portfolio.

Your search process will give you a list of stocks to assess. It might be a handful of names or hundreds.

I’ll tackle the problem of generating ideas in a future post.

410 Stocks to Assess

My initial list of companies came from the 2024 Russell Reconstitution lists. There were 212 additions and 198 deletions from the index for a total of 410 companies to sort through.

Even taking one minute per company would require almost a full day’s worth of work. That’s not unreasonable given the potential, but I needed to winnow it down.

Microsoft’s Stock Function

The first thing I did was put the tickers into Excel. The built-in Stock function pulls description, industry, and market cap, and can include other attributes, too. But those three are enough to make quick judgments.

You can then easily create a sortable table for filtering. This is especially useful if you’re only looking for companies from certain industries.

Iterative Filtering - The First Pass (30 sec to 1 min)

I tend to go through a list like this a few times. The first is to filter out the companies I clearly don’t want to look at, putting the principle of inversion to good use.

For me, that’s usually biotech, startups, mining companies, non-bank financials, etc.

I have a column in the spreadsheet to put a note or simply an “X” to mark that I’ve eliminated it, which allows me to filter those out in subsequent passes.

This step probably eliminated a good 75% of the list, or about 300 companies.

Flash Financials - Going Deeper (3-5 mins)

The next step is to start scratching the surface to understand the opportunity.

You might already have an idea of the company’s financials if you’ve screened along certain metrics (low debt/equity, high ROE, etc.) Either way, you need to quickly size up the company.

Here I’ll turn to CapEdge or ROIC.ai to get a quick financial snapshot.

Major red flags at this point include highly indebted companies, those with little to no revenue history, lots of red ink on the bottom line, etc. When I find a red flag like that, I stop and move on. Time is precious!

Here’s what my five-minute assessment of Medifast turned up:

• $156 million cash + investments compared to a market cap of $270 million

• No debt, only minor operating leases

• Price/book value of 1.3x

• $100mm earnings in 2023 (the last full year then available) and $67mm TTM profits through Q1.

• Sales had grown from $500mm in 2018 to $1.6 billion in 2022, only to decline by a third to $1 billion in 2023.

The quick 5-minute assessment was roughly as follows:

Here’s a company clearly undergoing a significant change in its operating environment, with sales down by a third in one year. Yet, the company remains profitable. Furthermore, it has a very strong balance sheet with loads of liquidity and essentially no debt.

At this point, I had lots of questions, but I was intrigued. I knew basically nothing about the weight loss industry aside from general reading that GLP-1 medications were highly disruptive.

Below is a snapshot of the actual spreadsheet, including my note, from 2024. The description is auto-populated with the stock function. The two columns on the right are my “discard” and “keep going” columns to sort my findings.

Scanning the 10K (5 mins)

I was down to about a dozen companies after going through a similar process with the remaining 100 or so companies on my list. Now it was time to peek under the hood at the latest 10K or annual report.

I pulled up Medifast’s 2023 annual report and started scrolling through:

• Just a few pages of marketing fluff at the beginning

• A letter to shareholders was present. I took a few minutes to read through the letter, noting the substance-to-marketing ratio. Some letters are clearly written by the marketing department, a disservice to investors.

• A scan through the business section of the 10K (Item 1. Business in every 10K) led me to believe I understood the basic business model of the company.

The Decision Point

By now, I had completed an initial assessment of Medifast, investing about 10 minutes of my time.

• Since it wasn’t something in my “don’t want” list, it passed the first filter.

• Then, a quick assessment of the financials didn’t turn up any red flags. Seeing the large amounts of cash and no debt made me even more interested in digging in.

• Finally, a quick scan of the annual report found a letter to shareholders and a business description that led me to believe I could understand the business if I dug in further.

Weighing the other opportunities I’d found against this initial assessment, I decided that it made sense to move into the research phase and conduct a proper deep dive. Given that Medifast had loads of excess cash and appeared to be trading a single-digit multiple of earnings, I fast-tracked my research and ended up buying shares (wrong timing in retrospect, but the jury is still out).

Applying The Four Filters

I didn't apply the four filters in order, but I applied all of them.

Filter #1: Can I understand it?

I answered this question multiple times throughout my assessment. In the initial description of the company, and as I read through the letter to shareholders and the business description in the 10K.

Filter #2: Is it a good business?

I didn’t have enough information to know at this point, but I had clues. First off, the presence of lots of cash means it had been profitable in the past. Second, it was very profitable in the few years leading up to my finding the company. Third, it appeared that the company had a highly variable cost structure that could protect it from sales declines.

Filter #3: Is anything obviously wrong?

I had to weigh the clear impact of GLP1s with the opportunity to buy a company at a distressed price. But I didn’t find any major red flags in my initial assessment that would lead me to abandon my research efforts.

Filter #4: Timing / Is There a Reason to Care Now?

The market was clearly pricing Medifast at distressed prices. This was a company I wanted to research deeper immediately to be in a position to take advantage of Mr. Market.

This example shows what a good filtering process looks like in practice.

What does your first-pass filtering process look like? Let me know in the comments.

More thoughts? Let me know in a private message or leave a comment.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

Note: This is the first in a series of “how-to” posts exploring the investment process.

The Filtering Problem

Most investors don’t have an analysis problem. They have a filtering problem.

Ideas come in at a rapid pace:

• Posts on social media or investment sites

• Newspapers/business press

• 10K’s and other filings

• Screens or published lists of stocks meeting certain criteria

• General scuttlebutt

Some of these ideas come from smart investors who have already done hours of work. That only makes the problem harder. The volume creates a constant sense that there is always one more thing to read, one more company to study, one more idea you might be missing.

The problem is spending too much time digging into businesses that were never worth studying in the first place.

Building a model or thesis feels like “doing the work,” but it’s expensive if it means giving up time evaluating other ideas or going deep on the one that could move the needle in your portfolio.

A Filtering System

The best investors eliminate ideas fast. Not after three hours, not after a full model. Within minutes.

Warren Buffett has talked about his filtering system over the years, at different times and in different ways. Summarizing his most basic framework, he is looking for businesses that:

1. Earn good returns on capital

2. Are run by able and honest managers

3. Are available at a sensible price

That sums up what I want, too, but getting there requires some work.

In the search for good businesses, I need to filter fast to preserve time for the rare ideas that deserve my time and energy.

Too much analysis, too quickly, leads to missed opportunities because I can’t spend 40+ hours on every idea.

My Filtering System

What we need is a funnel:

• Lots of ideas at the top

• A multi-layered, rigorous filtering system

• A few ideas worth owning now or following up on later

The mistake many people make is treating every idea as if it belongs at the bottom.

But every idea should earn more of your time.

The Zeroth Filter: Am I Interested?

Before circle of competence, I start with a simpler question: am I interested in the industry at all?

For example, I’ve never been particularly interested in the oil and gas industry. I think I can understand it, but it’s just not something that’s really captured my interest.

Likewise, I stay away from tobacco companies because I don’t want to be an owner of a company that produces products I think are harmful to people.

Your list might include similar exclusions based on interest, morality, religion, etc.

Exceptions: It’s worth studying different industries to expand your knowledge of businesses and perhaps widen your circle of competence.

Filter #1: Do I Understand The Business?

I usually start by skimming through a 10K or two and reading the shareholder letter. If I can’t understand the business quickly, I move on. I ask questions like:

• Can I understand and describe in a few sentences how this business makes money?

• Do I understand the important industry dynamics and trends?

We don’t need extra precision here. We might not even need a spreadsheet. The idea is to determine if the business is understandable and if we understand the basic characteristics of the business and its industry.

Filter #2: Is it a Good Business?

Once I understand the business, I want to know whether it’s any good. I ask questions like:

• What is the earnings power of this business currently, and how cyclical is it?

• Does it earn strong returns on capital?

• Does it appear to have a durable competitive advantage (a moat)?

• Are sales, margins, and returns moving in the right direction?

Filter #3: Red Flags

This step happens alongside the earlier filters. Encountering any major red flags along the way is grounds for an immediate stop.

• Management dishonesty (hard to suss out immediately) or an inconsistent story

• Management and/or director turnover

• Unnecessary accounting complexity or restatements

• Financial engineering or capital structure mismanagement

  • Overleveraging

  • Continual equity issuance

  • Off balance sheet vehicles

Filter #4: Timing

Is there a reason to care right now? Is there an obvious mispricing, a temporary industry or business-specific issue, or some complexity that’s worth spending time on?

If the business looks cheap, it might be worth spending a lot of time digging in immediately.

Or perhaps it looks like a great business, but it’s priced to perfection. Then you can determine whether to move on or add it to a watchlist.

Other Approaches

My own bias is toward good businesses, so that shapes how I filter. Other investors may start with different criteria, such as asset value, special situations, or a specific industry. The principle is the same: most ideas should be eliminated quickly.

Your Goal is Efficiency

Most investment ideas can be put into the TOO HARD pile within seconds, many within 10-15 minutes.

The goal is not to judge every business perfectly. It is to allocate attention well and be efficient with your time.

An intentional, well-thought-out filtering process will allow you to look at more ideas and only go deeper when it matters.

The core four filters do a lot of heavy lifting:

• Filter #1 = Can I understand it?

• Filter #2 = Is it a good business?

• Filter #3 = Is anything obviously wrong?

• Filter #4 = Is there a reason to care now?

Most ideas should be discarded. Some should go on a watchlist. Very few should earn deep work.

The edge is not superior analysis on every idea. It is rejecting bad uses of time early and focusing only on the few businesses that deserve serious work.

More thoughts? Let me know in a private message or leave a comment.

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Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

In Case You Missed It: Heineken Analysis & Valuation

FreightWaves → BNSF Announces $3.6 Billion Capital Investment Plan for 2026

HousingWire → Clayton’s TRU Mini homes aim for infill sites and entry-level buyers

GEICO Falls Further Behind State Farm and Progressive

Progressive is this close to unseating State Farm.

JP Morgan 2nd Quarter Guide to the Markets

Japan Cat Pricing Down 20%

Warren Buffett is Still Hard at Work (CNBC)

This week in Berkshire History

March 30, 2007: Berkshire acquires TTI, Inc., a distributor of electronic components.

April 1, 2007: Fruit of the Loom closes on its acquisition of VF Corp.

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

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Adam

Pre-Order the 2nd Edition Now!

Prior Heineken Posts

Disclosure: Long Heineken NV

Highlights

Full year 2025:

• Consolidated volume of 234mhl (million hectoliters), -2.8%

  • Heineken volume of 62.7mhl, +2.6%

  • Volume increase in Asia Pacific offset by decreases in Africa and the Middle East, the Americas, and Europe

  • Licensed volume +17.%

• Consolidated net revenue of €28.75 billion, -3.6%

• Operating profit of €3.4 billion and €4.4 billion beia (before exceptional items and amortization of acquisition-related intangibles)

• Net profit of €2.66 billion (beia)

• €1.3 billion dividends and €701 million share repurchases

• Contracted to buy (closed in Jan. ‘26) the remaining 75% of Central America-based Florida Ice and Farm Company SA (FIFCO) for USD $3.2 billion, funding a portion of the acquisition with debt.

What’s Covered Below

1. Operating performance analysis

2. Capital allocation & balance sheet

3. Return on capital analysis

4. Valuation

Read more

In Case You Missed It: Heartland Express Update

Berkshire Goes Deeper Into Japan

Word Bubble Fun

A 100-word word bubble using Greg Abel’s inaugural CEO letter.

Is the Value Premium Dead?

AM Best Upgrades Cap Specialty

Interesting to note the unit is invested 100% in Treasuries

Diverging Fortunes of Novo Nordisk and Eli Lilly

Speaking of GLP1s…

Possible Catalyst for Medifast?

Steamboat Capital disclosed a 5% stake in the company and will get two board seats as part of a “cooperation agreement”. As part of this agreement, Steamboat agreed not to launch a proxy fight until three months after the 2027 annual meeting.

Timelapse of the Tech Sector

Scenic Route Investing by Wagner Road

A Timelapse of the Tech Sector (Part 1 Continued: The Personal Computer Revolution)

Catch up if you missed the beginning of Part 1…

Read more

a month ago · 1 like · Andrew Wagner

This week in Berkshire History

Nothing this week!

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Prior HTLD Posts

Disclosure: Long HTLD

Highlights

Full year 2025:

• Revenue of $806 million, down 23%

• Operating loss of $57.4 million

  • Loss of $38.4 million, excluding a $19 million non-cash charge related to CFI trade name impairment

• Full-year operating ratio of 107.1; 104.7 as adjusted

  • Sequential improvement in each quarter

• $10.4 million share repurchases

• $41.2 million debt reduction

What’s Covered Below

1. Operating performance analysis

2. Balance sheet analysis

3. Capital allocation

4. Return on capital analysis

5. Valuation

Read more

In Case You Missed It: Boston Beer Update

Scenic Route Investing by Wagner Road

Investing in AI Infrastructure (Part 1: The Big Picture)

The “big five” hyperscalers — Amazon, Alphabet, Microsoft, Meta, and Oracle — are expected to spend more than $600 billion on capital expenditures this year, 36% more than last year (and about 3 times more than what was spent in 2022…

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a month ago · 5 likes · Andrew Wagner

Bubbles In Space

“When light of a certain wavelength hits the molecule, its structure shifts, changing from water-repelling to water-attracting and altering its shape.”

: Are You Wasting Your Life?

The Culturist

You Are Wasting Your Life

You only have one life, so how will you live it…

Read more

2 months ago · 262 likes · 8 comments · The Culturist and Evan Amato

This week in Berkshire History

March 15, 2020: Berkshire sells BH Media Group (including The Buffalo News and The Omaha World Herald) to Lee Enterprises.

March 18, 2008: Berkshire acquires a 60% stake in Marmon Holdings, Inc.

March 21, 2022: Berkshire agrees to acquire Alleghany Corp. for $11.6 billion

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

Prior SAM Posts

Disclosure: Long SAM

Highlights

Full year 2025:

• Depletions -4%; shipments -4.7%

• Annual volume: 7.1 million barrels

• 85% of volume from the beyond beer category

• Net revenue of $1.97 billion, -2.4%

• Gross margin +410bps to 48.5%

• Operating margin +360bps to 7.4%

• $108 million net income

• $270 million operating cash flow; $216 million free cash flow

• $200 million share repurchases reduced share count by 7%

• Pre-tax return on capital increased from 8.4% » 17.9%

• Pre-tax return on tangible capital increased from 10% » 21%

• $186 million net cash (including leases)

What’s Covered Below

1. Operating performance analysis

2. Balance sheet analysis

3. Return on capital analysis

4. Share repurchases

5. Valuation

Read more

In Case You Missed It: Hingam Savings Valuation Update

Private Investment Coaching

I’m offering a limited number of spots to help you gain confidence in your investing process and analysis.

Learn More

Less Is More

The Hingham Savings annual letter referenced a paper in Nature about the virtues of subtraction. I found this Economist article and this video that summarizes the paper.

History & Economics of Prefab Homes

Construction Physics

The Elusive Cost Savings of the Prefabricated Home

It’s long been believed the constantly rising costs of new home construction, and lackluster improvements in construction productivity more generally, are fundamentally a problem of production methods. Most houses in the US are still built on-site, using manual labor and hand tools, a manner of construction that doesn’t seem all that different from cons…

Read more

2 months ago · 85 likes · 27 comments · Brian Potter

Building Marriott at Age 55

This week in Berkshire History

March 9, 1967: Berkshire enters the insurance business with the purchase of National Indemnity and National Fire & Marine Insurance Company.

March 14, 2000: Berkshire acquires a 76% economic interest in MidAmerican Energy Holdings, investing $2 billion.

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

Last year, I worked with a small number of motivated investors to improve their ability to research businesses, build models, and make better investment decisions.

We worked on businesses they actually wanted to understand, helping them develop a practical, repeatable value investing process.

Who Is This For:

• Serious individual investors

• Aspiring investment analysts

• Early-career professionals with a basic understanding of accounting and financial statements

What You’ll Get:

• A 10-week program

• Weekly one-on-one meetings and support between meetings

• Hands-on help with idea generation, company research, modeling, watchlist construction, and portfolio decision-making

• Weekly assignments designed to strengthen your research process and judgment

• A behind-the-scenes look at how I research, evaluate, and track businesses

Why It’s Different:

• Built around your own watchlist and interests, not a canned curriculum

• Individualized support through one-on-one coaching (no groups)

• Direct feedback on your thinking, models, and process

The goal is simple: to help you become a more capable, independent investor.

What others have to say…

“Adam is thoughtful, practical, and consistently focused on exceeding expectations. His depth of knowledge and experience translates into exceptional coaching with clear, real-world insights. I would strongly recommend working with him.”

"Adam's coaching class is a great value for the price proposition. Adam tailored the program to my level of knowledge and worked very hard to ensure I learned and was comfortable with all the concepts needed to improve my knowledge in intelligent value investing. Whether you are just starting out or have been investing for a while this course will be very valuable to you and pay off tremendously in the long term if you use the concepts he teaches."

“Adam integrated deep financial analysis into my investing toolbox. His blend of theory, practice, and proper cadence pushed me to learn by doing. I didn't just study the craft; I acquired it.”

Apply Now

I will review all applications and follow up with an email on the next steps.

Prior HIFS Posts

Disclosures: Long HIFS

Highlights

Hingham

• Demonstrated progress. Core ROA: 0.72%; core ROE: 7.06% for FY 2025

• Q4 core metrics at 1.84% and 17.50%, respectively

• NIM to 1.89% for Q4, up 15bps; December NIM 1.96% annualized

• Assets +1.9% and loans +0.7% from the end of 2024

• Deposits + 2.9% including NIB deposits +17.7%

• Continued overhead discipline at 67bps

• NPAs at 0.69%; workout on DC loan continues

• Leverage at 9.46x at the end of 2025 compared to 10.32x at the end of 2024.

• Regulatory approval for $20 million in share repurchases

What’s Below?

1. Operating performance analysis

2. Loan book analysis and geographical breakdown

3. Analysis of deposits

4. Analysis of the newly disclosed investment portfolio positions and historical returns

5. Insider ownership changes and major holders

6. My thoughts on the Wolfpack short report

7. Valuation

Read more

In Case You Missed It: Berkshire Deep Dive Update

Greg Abel’s First Letter

The Entire Abel Interview (Start at 13 mins)

Scenic Route Investing by Wagner Road

A Timelapse of the Tech Sector (Part 1: Before the Internet — Technology as a Physical Space)

There are many “snapshots” in time. They usually happen in the moment, looking at where things are right now and speculating about where things are going. What I’m doing here is a series of snapshots intended to make a long-term timelapse, because I find it helpful to examine the strategies and conditions that made businesses successful in the past. It…

Read more

2 months ago · 4 likes · Andrew Wagner

This week in Berkshire History

March 4, 2022: Berkshire spends $4.6 billion on equity securities in one day

March 7, 1931: Associated Retailing, a chain of department stores operated by Ben Rosner and Leo Simon, and later merged into Berkshire via its Diversified Retailing merger, was formed.

That’s it for this week. Hit reply and let me know what you think. What have you been reading that’s worth sharing? Let me know in the comments.

Leave a comment

Stay Rational!

Adam

Pre-Order the 2nd Edition Now!

Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

Let’s Talk Berkshire!

Join us on Friday, March 6th, at 1 pm ET to discuss Berkshire and more. Paid subscribers have the link to join the private Google Meet. Don’t miss it!

Subscribers can access the live Google Sheet here.

Prior posts on BRK

Disclosures: Long BRK

Sum-of-the-Parts Valuation

Berkshire is best valued using a sum-of-the-parts method. This approach hits the sweet spot between too much detail (you could just read the 154-page annual report for yourself) and the roughly right (but lacking) shorthand methods, such as applying a price-to-book multiple, or even Buffett’s own two-column method (see the 1995 Chairman’s letter), which adds per share investments to a multiple of per share operating earnings.

Berkshire is, of course, more than the sum of its parts, but that can be left as a qualitative factor. Berkshire’s stability demands less of a margin of safety, and the many reasons why it’s worth more together can be thought of as a margin of safety. It’s there, but you can’t put a precise figure on it. And that’s OK — welcome to the messy world of valuation.

Let’s dig in, considering Berkshire’s sources of value from its cash/treasuries, fixed maturity (bond) investments, marketable equity securities, its railroad, utilities, manufacturing and service businesses, and insurance. We’ll also adjust for debt at the holding company level and for a possible adjustment to BNSF’s valuation.

Cash

Simple, right? Not so fast.

Adding up ALL cash we get $373.1 billion. This is AFTER deducting $167 million payable for the purchase of US Treasuries. The figure is tiny now but amounted to almost $13 billion last year.

For valuation purposes, I use $368.99 billion, which excludes cash in the rail/utilities businesses. The rail sends its excess cash to Omaha ($4.4 billion last year) and needs what’s left, as do the utilities, which are continually investing in replacement and growth capex.

I consider all but about $50 billion real dry powder. That figure isn’t pulled from a hat. Rather, it’s the approximate amount of claims paid annually in the insurance business (see p. K-87). (One might argue the case that this should also be deducted from the value, as it’s permanently locked up.)

Fixed Maturity Investments

Berkshire keeps its maturities short and credit good, so this isn’t an area to spend much time (it’s also tiny in the grand scheme of things).

Equity Investments

I generally assume the equity portfolio is valued fairly unless an extreme case jumps out in one of the larger holdings. In recent years, that’s meant shaving something off for Apple’s apparent overvaluation.

I adjust Apple’s value to 20x earnings, add cash and marketable securities, and deduct debt.

I also deduct the deferred tax liability, which is adjusted to account for any valuation adjustments.

Berkshire was again a net seller of stocks in 2025.

Greg Abel gave us a great snapshot of the Japanese equities portfolio, which is included above. Berkshire has funded these investments with $14.1 billion of Yen denominated debt at a mouthwatering 1.2% interest rate.

Equity Method Investments

Ownership between 20% and 50% requires equity method accounting, where the investee (BRK) must report a single line for its share of earnings and equity on its income statement and balance sheet, respectively.

The two major investments in this category are Kraft Heinz (27.5% ownership) with a fair value of $7.9 billion and Occidental Petroleum (26.9% excluding warrants) with a fair value of $10.9 billion. The third investment is a 50% ownership in Berkadia with a carrying value of $450 million.

For simplicity, I used the carrying values for all three. The difference between the carrying value and the fair value of KHC is $734 million. That’s primarily a result of a $5 billion pre-tax impairment charge taken in Q2 2025.

The Oxy carrying value matches the fair value on account of a $5.7 billion pre-tax impairment loss recorded at the end of Q4. Berkshire noted that the carrying value exceeded its share of Oxy’s shareholders’ equity by $3.4 billion — in other words, it’s trading at a premium to book value.

Burlington Northern Santa Fe

Berkshire Hathaway recouped its purchase price for BNSF in Q1 2019, nine years after purchasing the railroad for $33.5 billion. And the cash continues to pour in. $4.4 billion was sent to Omaha last year alone. This year (2026) should bring cumulative dividends to nearly 2x the purchase price.

BNSF reported flat revenues on 30bps of higher volume and a half point decline in pricing.

Operating performance in 2025 improved compared to 2024, but BNSF still lags behind its main rival, Union Pacific. UNP’s operating margin (EBIT) was 40.2% in 2025 compared to BNSF’s of 34.5%. If BNSF achieved UNP’s margin, it would earn $1.3 bilion more, a fact noted by Greg Abel in his letter to shareholders.

As seen in the table and chart below, volume is fairly flat and stable. BNSF should be able to right-size its expenses to this level of volume before long.

Coal volume was up 1.1% in 2025 but is down 20% from three years ago. Near-term demand may see this abate but the long-term decline is inevitable.

BNSF’s capex has averaged about 140% of depreciation over the past three years. Flat unit volume highlights the fact that BNSF must spend about $1 billion in excess of its depreciation charges just to maintain its business. This means true economic income was probably about $4.5 billion last year and emphasizes the need to get the operating ratio back to peer levels. (No surprise that dividends to BRK were $4.4 billion, about equal to economic earnings; BNSF preserved its levels of cash and debt.)

I think BNSF is probably worth between $80 billion and $90 billion. I put a 15x multiple on the $5,476 million of earnings. This feels fair, as earnings are overstated due to the capex/depreciation mismatch described above, but also considering that the rail is underearning its potential. Each factor, plus and minus, is about $1 billion and we don’t need to split hairs. Another very minor plus is a small boost from deferred taxes that’s probably worth a few hundred million a year.

A note on valuation: Just because UNP is trading at $155 billion doesn’t make BNSF automatically worth that much; I have to go where my reasoning leads.

Berkshire Hathaway Energy

BHE has grown from a base in the Midwest to become one of the largest, most respected, and most efficient operators in the United States.

Here is an overview of the major segments of the company as they exist today:

• MidAmerican Energy Company: Regulated electric and gas utility

• PacifiCorp: Regulated electric utility

• BHE US Transmission: Regulated electric transmission

• NVEnergy: Holding company for:

  • Nevada Power Company: Regulated electric utility

  • Sierra Pacific Power Company: Regulated electric and gas utility

• Northern Powergrid: Holding co. for two United Kingdom-based electric distributors

• Altalink: Alberta, Canada-based regulated transmission

• BHE Pipeline Group:

  • Kern River: Regulated natural gas transmission

  • Northern Natural Gas: Regulated natural gas transmission

  • BHE GT&S: Various natural gas assets acquired from Dominion Energy

BHE is in a unique position. On the one hand, it’s PacifiCorp subsidiary is mired in lawsuits and uncertainty, a result of several wildfires. On the other hand, data center demand, coupled with its low-cost position, is a truly enormous opportunity.

Wildfire accruals totaled just $100 million in 2025, down from $346 million in 2024, and $1.9 billion in 2023. While $1.7 billion has been paid, the ultimate liability remains unknown and the regulatory/political landscape is uncertain. In February 2026, PacifiCorp announced it entered an agreement to sell its Washington state electric utility to Portland General Electric for $1.9 billion. This seems to be the beginning of a strategy of reducing risk in unfavorable regulatory areas in favor of investment in other areas.

Data center demand is truly enormous. According to a BHE presentation, meeting current demand could result in 12% growth per year through 2030, truly unheard of growth rates.

Viewing BHE through a few major categories, US utilities saw 2.2% higher volume and higher prices.

Lower margins on natural gas and higher expenses reduced earnings in the pipeline businesses.

Earnings at the other energy businesses, which include everything from the UK utility to renewables, declined almost 12%. Berkshire provides scant details, but luckily, BHE files its own 10K and we can find answers there. Northern Powergrid (the UK distribution business) saw earnings fall 37% primarily from lower rates and inflationary pressures. Meanwhile, the renewable business grew 31% mainly from higher wind, natural gas, and geothermal earnings.

BRK Home Services rebounded to a profit largely due to a $140 million charge taken in 2024 as part of its industry group settlement.

Like BNSF, BHE receives a boost from accelerated depreciation, though this benefit has moderated considerably in recent years.

Right now, I think a 15x multiple on the roughly $4 billion of after-tax earnings plus deferred tax savings is fair, leading to a value of $70 billion.

There are risks in the current wildfire litigation and in future regulatory/political uncertainty. Additionally, BHE has historically benefited from clean energy credits, which are under pressure.

These risks and headwinds are balanced against the significant demand coming from data centers.

Manufacturing, Service, and Retail

With 110,000 employees, $214 billion of revenues, and net earnings of $13.6 billion, the MSR segment is a huge operation within Berkshire. Many of its businesses are large in their own right. The best example of this is Marmon, with 28,000 employees and 100 operating businesses of its own, one of which is Scott Fetzer, a mini-conglomerate of its own (we’re at the 3rd level of the nesting doll) with a dozen subsidiaries.

Results in 2025 were satisfactory, with a pre-tax margin of 8.2%, the highest in the last three years. We have scant detail on the composition of the balance sheet of this segment. We know it employed $185.5 billion of average “identifiable assets as year-end”. A straight calculation using net earnings puts return on assets at a respectable 7.3% (remember, we don’t know what payables + accruals amounted to, and we know there’s a modest amount of debt).

Of note, the inclusion of Pilot, with its low margin (but satisfactory return on capital) business skews the longer-term view of margins.

Combined, they spent $6.3 billion on capex compared to depreciation and amortization of $5.4 billion.

Manufacturing

Industrial products were the star in 2025 with a record pre-tax margin of 18.3%. Thank Precision Castparts, whose pre-tax earnings swelled 34% on strong aerospace demand. Lubrizol’s earnings slid 20.6% on end market weakness as well as restructuring costs and litigation. Marmon had a good year with earnings up 8.5%, including strength in Plumbing and Refrigeration (revenues +11.7%), though Crane Services fell 12.6% from price competition and fewer wind projects. IMC looks to have had a middle-of-the-road year.

Annoyingly, Berkshire only gives us the percentage changes this year. Below, I’ve reconstructed the history of pre-tax earnings based on known disclosures throughout the years.

Clayton Homes leads the Building Products segment with about half of its revenues. Nothing too exciting from Clayton. Ditto with the other building products companies, whose revenues slid 2.1% and pre-tax earnings fell 8.1% due to slowing housing markets.

Consumer Products results were flat in 2025. Sales were off 3%, but pre-tax earnings grew a like amount, which looks to be largely the result of Duracell booking refundable tax credits for 2023-25 in 2025.

Service and Retailing

The Service businesses had a great year in 2025. Revenues were up in aviation services (9.9%), IPS (24.2%), and TTI (12.3%). Berkshire attributed the 17.3% increase in pre-tax earnings to aviation services and TTI.

Sluggish demand resulted in lower earnings from the Retailing businesses, although Nebraska Furniture Mart was singled out as the sole exception.

Pilot continues to struggle amid a rebranding effort, lower margins, and higher costs.

McLane long struggled with brutal competition and has been back in the mix the last few years. Results in 2025 continued the trend, with a margin of 1.3% (small, but it has a huge turnover; the margin had been as low as 0.5%).

MSR Valuation

I continue with my 15x multiple on net earnings. That produces a value of $205 billion, up about 4.5% from 2024. I think that’s fair for a few exceptions, many very good, and a bunch of average businesses.

Insurance

The insurance segment is simply printing money. Strength at GEICO and low storm activity in reinsurance have produced stellar results.

Berkshire earned a 10.64% margin on $88.9 billion of premiums in 2025. Flipped around, that’s a 89% combined ratio, which isn’t sustainable.

I think it’s fair to adjust the margin to 4% (96% combined) and put a 12x multiple on the resulting $3.56 billion of pre-tax earnings. (12x pre-tax = 15x after-tax @ 21%).

Retroactive reinsurance and periodic payment annuity lines have been on run-off for many years now. Some day, Berkshire will write another large retro policy (perhaps on capped cyber risk???) and will benefit from its patience.

One of my favorite tables… this shows Berkshire’s conservatism. The highlighted line is what’s known as reserve development. Negative figures are called favorable development, which means Berkshire overestimated its losses in prior years (read: underestimated its profit). It’s one of the key items to keep track of.

Holding Company

Finally, we have to adjust for debt at the holding company level. Berkshire had borrowings of $22.6 billion. Including, remarkably, $14.9 billion of yen-denominated debt with an average rate of 1.2% used to fund the cost basis of the Japanese trading company investments.

Valuation Conclusion

I think Berkshire is worth about $1 trillion today, or roughly 1.4x book. The conglomerate is a remarkable collection of assets, many of which are simply not replicable. Berkshire has many advantages being under one umbrella and should compound at a decent but by no means exceptional rate.

Greg Abel’s first letter to shareholders was well written and reiterated his buy-in to the Berkshire way. I have no doubt that Greg will “keep the culture”, and I’m excited to see the next chapter under his leadership.

Stay Rational!

Adam

What do you think? Hit reply or leave a comment below.

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Amazon, Barnes & Noble, or directly from Harriman House, and at other major bookstores, for delivery in April 2026.

Praise for the 2nd Edition

I’m incredibly grateful for the people who took the time to review early drafts of the new material and provided feedback, as well as praise for both editions:

“If you want to understand how Warren Buffett built Berkshire Hathaway into one of the most valuable businesses in the world, you have to read this book. This is your opportunity to stand beside Picasso as he paints each brush stroke. A must read for all Buffett and Berkshire groupies.”

- Bill Ackman, Founder and CEO of Pershing Square

“I and my teammates at the Gabelli Organization have been tracking Warren’s success for some 50 years. Adam’s book captures the work and highlights the history of Berkshire and the hard and diligent work of Buffett and Munger, Jain and Abel, and Combs and Weschler.”

- Mario Gabelli, Chairman and CEO, Gabelli Funds

“Adam Mead’s discussion of the values and virtues which have shaped Berkshire Hathaway over 50 years is a must read for those investors in search of the forces that have delivered such investment value over time.” – Thomas A. Russo, Gardner Russo & Quinn LLC

“Few activities can be more rewarding for any value investor than studying the history and evolution of Warren Buffett and Berkshire Hathaway. Adam has done us a huge favor with his yeoman efforts in producing this treatise. Since it is chronologically ordered, it is an invaluable reference guide for all things Berkshire.” — Mohnish Pabrai

“Adam continues to deliver a resource very valuable to both Berkshire fans and the investor community as a whole, his depth of knowledge is clearly demonstrated here again. I thoroughly enjoyed this latest addition.” - Dan Calkins, Chairman & CEO, Benjamin Moore

“The question must be asked, ‘Why another Berkshire book?’ When you read this monumental effort by Adam Mead, the answer will be obvious. Read cover to cover, both the uninitiated to Berkshire and its most ardent followers will derive enormous utility and satisfaction from it. I learned so many new and important things about Berkshire and its history. It is my pleasure to encourage you to enjoy this gem.”

- Christopher P. Bloomstran

“Whatever Adam writes is always first-class - guaranteed.

-Andy Kilpatrick, Author, Of Permanent Value: The Story of Warren Buffett

“With this project, Adam has done a wonderful job extending the Berkshire Classroom by providing a comprehensive analysis of the rich corporate history and unique entrepreneurial leadership.” — Mac Sykes, Gabelli Funds

“Adam Mead’s The Complete Financial History of Berkshire Hathaway is the definitive history of Berkshire. While there have been countless books written about Warren Buffett’s investment approach, none have so meticulously documented Berkshire’s capital allocation decisions from the very beginning. The depth of research is staggering, transforming the complex and sometimes chaotic story of how a small textile mill became a financial conglomerate into a clear, year-by-year narrative of every significant investment and acquisition. In this updated edition, Adam carries the narrative through Berkshire’s sixth decade and the methodically planned leadership transition to Greg Abel. For students of business history, this is an indispensable resource.”

-Patrick Gaughen, President and Chief Operating Officer, Hingham Institution for Savings

“The definitive story of Berkshire Hathaway—how Buffett and Munger turned a failing textile mill into one of history’s greatest wealth-creating enterprises, with timeless lessons in business, investing, and leadership.”

-Vitaliy Katsenelson, CEO of IMA, Author of Soul in the Game

“Berkshire Hathaway is a company with few, if any, parallels in business history. Under the leadership of Warren Buffett, it was transformed from a New England textile mill that would ultimately be shuttered to a sprawling conglomerate with a market valuation of more than $1 trillion. With this updated edition of “The Complete Financial History of Berkshire Hathaway”, Adam provides a thorough review of the key decisions that created the modern Berkshire Hathaway, an outcome inextricably tied to the investment and business wisdom of Warren Buffett and his business partner, Charlie Munger. In a few hundred pages, Adam adeptly runs through six decades of Berkshire’s history. For Buffett and Munger fans who want to truly understand how Berkshire was created, this book is a must read.”

- Alex Morris, Founder of TSOH Investment Research and the Author of Buffett & Munger Unscripted

“A meticulous chronicle of Berkshire Hathaway’s remarkable final act under Buffett’s leadership. Mead’s granular analysis of Buffett’s capital allocation decisions—from the $78 billion in share repurchases to the masterful Apple investment—provides unmatched insight into how the world’s most successful conglomerate navigated unprecedented scale and succession challenges.”

-Tobias Carlisle, Portfolio Manager, Acquirers Funds®

“This exceptional history of Berkshire Hathaway will appeal to history buffs, finance enthusiasts, and investing professionals alike. Mead combines rigorous research with remarkably clear storytelling, tracing the company’s ascent from a struggling textile mill to one of the world’s most admired conglomerates. The book is impressively detailed yet fully accessible—equally valuable for students learning the foundations of investing and for seasoned professionals looking to deepen their understanding of Berkshire’s evolution.”

-Gillian Zoe Segal

“With his ability to make complex things seem simple, Warren Buffett made the difficult work of building Berkshire Hathaway look easy. With this excellent history, Adam Mead takes us behind the scenes to see the details of how that work happened and was so successful. For anyone interested in Berkshire Hathaway, or the development of American capitalism, this is essential reading.”

- Bryan Lawrence, Founder, Oakcliff Capital

“There is simply no book that details the economic lore of Berkshire Hathaway better. A true exposé that every intelligent investor should read.”

- Gwen Hofmeyr, Founder, Maiden Financial

“The most comprehensive book on Berkshire Hathaway that has ever been written. It belongs on the shelf of every business enthusiast!”

-Andrew Wagner, Author of the Economics of Online Gaming and Founder & Chief Investment Officer of Wagner Road Capital Management

“Adam’s accounting of the Financial History of Berkshire is like candy for Finance and Business Junkies alike. It’s a must read if you’re interested in studying the greats.”

- Carter Johnson, Managing Partner, Singleton Valuations

“I thought nothing else of value could be written about Warren Buffett. I was wrong. Adam’s detailed chronology of Berkshire’s evolution reveals the successes and failures of Warren in a unique and digestible way. A worthwhile read for every Buffett scholar, amateur and professional alike.” — Drew Estes, Banyan Capital

“Mead has done the Berkshire faithful an incredible service by stitching together the narrative and numbers so tightly, you can see the compounding in action—updated and genuinely useful.”

-Jacob Taylor, CEO of Baserate

“Adam Mead’s work reminds us that true value is found not just in numbers, but in the lasting quality where few care to linger. By doing exceptional due diligence his book clones the lessons of Warren and Charlie.”

-Jeff Gilbert

Adam Mead’s updated “Complete Financial History of Berkshire Hathaway” is a book like no other—chronicling six decades of evolution while reminding us that Berkshire, though Buffett’s masterpiece, remains subject to constant change—an indispensable addition to any serious investor’s bookshelf.

-Bogumil Baranowski, Founder of Blue Infinitas Capital, Author of “Money, Life, Family”, Host of Talking Billions Podcast