The Valley Falls Company, Public Domain
In 2018, shareholders made a pilgrimage to Omaha, Nebraska, aka “Berkyville,” where Berkshire Hathaway shareholders came from all over the world to attend the annual event. Some came for the question and answer session; others came for shareholder shopping deals. Many parents bring children to expose them to Warren Buffett’s investing principles through osmosis. Precocious child investors go to soak up investment strategies dragging along indifferent parents. To get a floor seat for the question and answer sessions, people line up outside the CHI Heath Center before 3:00 am. “Floor seats don’t come cheap. You got to invest the time,” said a shareholder. People looking for extra income earned around $200 to wait in line for a participant. The Berkshire Hathaway Annual Shareholders meeting expands ever year. Many investors, however, are unaware of the company’s rise from textile mills to a diversified conglomerate.
Berkshire Hathaway began with the rise of the textile industry in the United States. It started when Samuel Slater heard that Benjamin Franklin and the Society for the Encouragement of Manufactures and Useful Arts awarded cash to people with textile skills that came to the United States. Slater apprenticed under Jedidiah Strutt, English Inventor Richard Arkwright’s partner. He brought Arkwright’s textile knowledge to American by memorizing his designs. Industrialist Moses Brown transported Slater to Pawtucket, Rhode Island to run machines modeled after Arkwright’s inventions. Instead, Slater built a new machine with a water wheel. Until the Civil War, textile manufacturing was the most important industry in America.
Like others, Oliver Chance came to Pawtucket to learn how to operate new textile technology under Slater. Living in Swansea, Massachusetts, his family came from England in 1630. Using his skills, he bought textile mills including the Valley Falls Company in Valley Fields Rhode Island in 1839. This company acquired other textile mills, expanding their portfolio. In 1929, Valley Falls Company merged with Berkshire Cotton Manufacturing Company established in Adams, Massachusetts in 1889. Headed by Malcom Green Chance, Chance’s great-grandson, the company became Berkshire Fine Spinning Associates.
Berkshire Fine Spinning Associates merged with Hathaway Manufacturing Company on March 14, 1955. Horatio Hathaway, whose family participated in the Chinese tea trade, bought the textile mill in 1888. At the merger, Berkshire had $120 million in revenue, 15 plants, and 12,000 workers with company headquarters in New Bedford, Massachusetts. In the 1940s, the textile industry declined because of outside competition.
In 1962, Warren Buffett noticed that when Berkshire Hathaway closed a textile mill, they took the proceeds and bought back its stock. The company was selling its stock at a discount, so it would be cheaper to buy back shares. Buffett saw an opportunity to purchase stocks cheap and sell it back to the company at a profit. After another Berkshire Hathaway textile mill closed, Buffett contacted the CEO and Chairman Seabury Stanton offering to sell his over 200,000 shares at $11.50 per share in an oral agreement. He continued buying shares becoming majority owner in 1964.
Buffet began expanding business beyond textiles. He diversified the company’s stock portfolio by expanding into insurance by purchasing National Indemnity Company. Berkshire Hathaway owns clothing shares in businesses like Fruit of the Loom. It also invests in retail companies like Nebraska Furniture Mart, Herzberg Diamonds, and See’s Candy. Berkshire Hathaway closed its last textile mill in 1985. This marked the company’s departure from the textile industry.
Each year, shareholders come to Omaha to attend Berkshire Hathaway’s Annual Meeting. Few, however, know how the company evolved. From the textile industries’ growth in the 19th century to its decline, the company has weathered and thrived through market changes. Berkshire Hathaway’s diverse portfolio shows that it will exist far into the next millennium.
References
B. Oderlin, (2018, May 6), No Place Like Berkyville for Shareholders, retrieved from Omaha World Herald, pg. 16T
M. Bellis, (2018, June 9), Biography: Samuel Slater, retrieved from ThoughtCo: https://www.thoughtco.com/the-textile-revolution-1992454
Meet Amazing Americans, (2010, August 1), retrieved from America’s Story from America’s Library: http://www.americaslibrary.gov/aa/index.php
Malcolm G. Chance, (1955, July 17), retrieved from the Boston Globe, pg. 40
Announcement, (1955, March 15), retrieved from The North Adams Transcript, pg. 7
Corporate Insiders Have Forgotten the Warren Buffett Feud with Seabury Stanton, (2017, June 3), retrieved from The Conservative Income Investor.
G. A. Patterson, (1985, August 13), Berkshire to Shut Mill, 400 Laid Off, retrieved from the Boston Globe, pg. 39