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) 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.
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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV