Powerhouse Companies
Berkshire's five to six major wholly-owned operating businesses that generate billions in pre-tax earnings and form the core of Berkshire's non-insurance operations.
Powerhouse Companies
Powerhouse companies (or "Powerhouse Five" / "Powerhouse Six") is Buffett's term for Berkshire's major wholly-owned operating businesses that generate substantial, consistent pre-tax earnings. These form the core of Berkshire's non-insurance operations.
The Powerhouse Five (2013)
| Company | Acquisition | Pre-Tax Earnings | CEO |
|---|---|---|---|
| BNSF | 2009 ($26.5B) | ~$3B+ | Matt Rose/Carl Ice |
| MidAmerican/BHE | 2000 (76%+) | ~$2B+ | Greg Abel |
| Iscar/IMC | 2006 ($4B) | ~$1B+ | Jacob Harpaz |
| Lubrizol | 2011 ($4B) | ~$1B+ | James Hambrick |
| Marmon | 2008 ($4.5B) | ~$1B+ | Frank Ptak/John Nichols |
Combined pre-tax earnings: $10.8 billion (2013)
The Powerhouse Six (2014+)
With the addition of Precision Castparts:
| Company | Added | Pre-Tax Earnings |
|---|---|---|
| Precision Castparts | 2016 ($32B) | ~$2B+ |
Combined: $12B+ in pre-tax earnings from six businesses.
Why They Matter
Scale of Earnings
These companies provide:
- $10-12 billion in annual pre-tax earnings
- Stable, recurring cash flows
- Diversified across industries
- Growth through organic expansion + bolt-on acquisitions
Capital Allocation Advantages
"These businesses generate $30-40 billion in pre-tax earnings annually, providing stable cash flow for continued deployment."
Key Characteristics
Durable Competitive Advantages
Each Powerhouse has significant moats:
- BNSF — Rail network barriers, pricing power
- MidAmerican — Regulated utilities, renewable leadership
- Iscar — Technological expertise, precision manufacturing
- Lubrizol — Essential chemical additives, customer relationships
- Marmon — Decentralized conglomerate, 125+ businesses
- Precision Castparts — Aerospace certification barriers, capital intensity
Acquisition Philosophy
Buffett applies the "See's Candy test":
- Can they raise prices without losing customers?
- Do they have durable competitive advantages?
- Are they managed by excellent people?
All Powerhouses scored well on these criteria.
Famous Quotes
"A collection of large non-insurance businesses that, in aggregate, had a record $10.8 billion of pre-tax earnings."
"These are the 'elephants' — businesses that can deploy significant capital at good returns."
Related
- berkshire-hathaway — Parent company
- capital-allocation — How earnings are deployed
- compounding — Reinvestment returns
- moat — Why these businesses endure