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Warren Buffett Quietly Reshaping Berkshire Hathaway

NEW YORK ( TheStreet) -- Warren Buffett's Berkshire Hathaway (BRK.A) rarely loses a deal fight, which makes Monday's news that the legendary investor was outbid for reinsurer Transatlantic Holdings (TRH) seem like a strange sight.

However, the fact that Berkshire lost out in a hotly contested bid to a competitor a nearly a tenth of its size in Alleghany Corporation (Y - Get Report) should not be so surprising given the Omaha, Neb.-based holding company's move away from its traditional reinsurance and insurance base and its shift to a more diversified portfolio of industrial companies.

Warren Buffett.

After Berkshire's $9 billion acquisition of chemicals company Lubrizol earlier this year, adding to its $26.5 billion purchase of railroad Burlington Northern Santa Fe in 2009 and $4.5 billion acquisition of industrials conglomerate Marmon in 2007, the company has altered a quarter of its overall revenue and profit.

"This isn't an insurance company anymore, it's a defensive conglomerate," says Tom Lewandowski an analyst at Edward Jones about Berkshire's transformation through recent deals.

While the billions spent on takeovers in recent years may look like a tack in strategy from minority investments and an insurance focus, Lewandowski says, "Berkshire has got where they are today because they haven't really changed a lot." Berkshire, as an investment management company, simply is sticking to its style of buying companies that need a giant funding source and have an attractive risk return, even if the nature of its investments are changing, says Lewandowski.

>>View Warren Buffett's Portfolio

Overall, the company, which may soon generate $20 billion in annual cash from its operations, needs to put that money to work for its shareholders who've grown accustomed to seeing shares rise faster than the S&P 500 Index. Signaling the need to make new types of industrials takeovers and bank investments, the company's total insurance group's revenue and profitability is still below pre-crisis levels.

With quarterly cash stockpiles over $34 billion, Berkshire's been able to spend billions in new types of investments as the global economic slump has turned many of America's blue chips into attractively priced, even distressed investments.

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