Invest in these 3 companies and you pretty much own the world

Some companies are so huge that it is quite difficult to remember what brands they own and which subsidiaries are under them.

Almost like the proverbial “all roads lead to Rome”, one can probably trace many companies to the same mother company.

I am going to introduce 3 behemoths you can invest in to own the world.

#1 Berkshire Hathaway – King of the West

Who doesn’t know Warren Buffett in the investing world?

His track record has been unbeatable – the only non-entrepreneur to be among the top 10 richest in the world. He did it by investing and buying other companies.

He said he was blessed with a long life to make compounding work and was born at the right time to ride the boom in the U.S.

Berkshire Hathaway raked in $254.62 billion revenue in 2019. This puts Berkshire Hathaway at 6th place in the Fortune 500 ranking. We must also understand that the public companies which Berkshire Hathaway has large stakes in listed companies which do not contribute revenue due to the accounting methods. Hence the size of Berkshire is understated by its revenue.

The conglomerate hired 391,500 in 2019. This also puts Berkshire Hathaway as the 6th largest employer in the U.S. spanning across various sectors.

Insurance is a key sector for Berkshire Hathaway. Buffett first took a big stake in Geico and it gave him a large sum of money to invest due to the premiums collected from the insurance business. The cost of capital is even lower than what the US Government could borrow at. Couple this low cost and safe leverage with Buffett’s investment prowess, the rest was history.

Berkshire still holds numerous insurance companies in its umbrella.

It is the largest insurer in the world by revenue.

Energy is another huge sector in which Berkshire Hathaway has invested in. The energy subsidiaries and investments are held under Berkshire Hathaway Energy and overseen by Greg Abel, the potential successor to Buffett (apart from Ajit Jain, who heads the insurance side).

Berkshire Hathaway owns the largest freight railroad network in North America – BNSF.

The second revenue driver for Berkshire Hathaway is its manufacturing segment, contributing 24% of the total revenue in the first 9 months of 2020. I doubt you would recognize the names of these companies (except perhaps Duracell and Brooks) but they are major B2B manufacturers in the U.S., ranging from aircraft parts to home construction to apparel.

Another B2B company, McLane Company, is one of the largest supply chain services leaders, providing grocery and foodservice supply chain solutions for convenience stores, mass merchants, drug stores and chain restaurants throughout the United States. It supplies to large retailers such as Walmart, Yum! Brands and 7-eleven. This subsidiary alone contributed about 19% of Berkshire Hathaway’s revenue in the first 9 months of 2020.

The services and retailing segment includes F&B such as See’s Candies and Dairy Queen; jewelers such as Borsheims, Helzberg and Ben Bridge; leasing companies such as Netjets, Charter Brokerage and Xtra; and furnishing such as Nebraska Furniture Mart, Star and Jordan’s. These businesses touch many aspects of American lives.

Lastly, Berkshire Hathaway is known for its foray in the stock market, taking large stakes in public companies. The holdings changed from time to time and were often not held as long as the wholly owned subsidiaries. Below is a list of public companies which Berkshire Hathaway has more than $1 billion invested in each of them.

Most of Berkshire Hathaway’s investments are in B2B companies that are critical suppliers to other businesses in the U.S. and are wholly owned.

Hence, the only way to get access to the underpinning of the American economy is to buy Berkshire Hathaway shares.

#2 Reliance Industries – The gateway to India

Reliance Industries is the largest publicly traded company in India and ranked 96th in the Fortune Global 500.

Mukesh Ambani is the chairman of Reliance Industries and the richest man in India as well as the whole of Asia, beating the likes of Jack Ma and Li Kashing. He also stays in the most expensive house in the world, worth US$1 billion.

Reliance Industries could have been bigger until the empire was split between the two brothers (Mukesh and Anil) after the patriarch passed away. Mukesh was very successful in launching Jio, driving down the cost of telecommunication services and putting many competitors out of businesses which include his brother’s. Anil lost his fortune after he was unable to pay debts owing to Ericsson.

Jio is a critical pivotal point for Reliance Industries which we will discuss after we go through the traditional businesses that Reliance has always been known for.

Reliance Industries’ empire span 6 business segments:

Let’s go through the segments with significant revenue contributions.

Retail – The retail segment contributed 20% of the revenue. Reliance Retail is India’s largest consumer electronics retailer and the largest fashion & lifestyle retailer in India. It makes a big deal when you are talking about the second most populous in the world. Retail revenues still managed to grow by 24.8% y-o-y despite its huge size. Below is an overview of their retail stores and products.

Refinery – The refining and marketing segment contributed the most revenue (~48%). With an annual crude processing capacity of 1,240,000 barrels (197,000 m³) per stream day, Reliance Petroleum is the largest refinery in the world. Besides refining, it also runs a chain of petrol kiosks and highway rest stations in India.

Petrochemicals – The petrochemicals segment contributed 18% of the revenue. These products are used for manufacturing a wide variety of goods.

But what is most impressive is the digital services, whereby Jio Platforms is the Reliance Industries’ lynchpin to transform into a technology player.

With its aggressive low pricing, Jio managed to become the largest mobile network operator in India and the third largest mobile network operator in the world in 3 years!

The story doesn’t end here. Jio has attracted international investors to fund its ambitious growth and vision. Instead of building the technology stack by themselves, they chose to work with partners who have the technology available.

Reliance and the global tech companies that recently invested in Jio are working together to build out the full mobile stack:

• Infrastructure. Through Jio, Reliance built a wireless data and broadband network across all of India over the past decade.
• Device. With Google and Qualcomm, Jio is building an affordable smartphone for the Indian market.
• OS. Old Jio Phones ran on Linux-based KaiOS, but the new JioPhone will run on Android.
• Product/Service. Jio will work with Facebook and its WhatsApp subsidiary to build the Super App through which Indian consumers do everything they need to do online. Below is a glimpse of the functionality of its superapp.

The only way for foreign tech companies to enter the Indian market is to work with Jio – as we have seen with Google and Facebook. Hence, Reliance Industries has become a gateway to India and it just needs to ‘collect toll’ to make money instead of building the technology by itself.

#3 Tencent – The closet venture capitalist of the East

I have already written a dedicated article on Tencent but it is worth repeating the key points here.

Tencent has chose to take the investment route, buying stakes in other sectors instead of building and growing them organically. For e.g., instead of starting its own ecommerce business, Tencent decided to invest in competitors to Alibaba.

Tencent is first known for its clout in games and it is currently the largest game company in the world by revenue.

It has stakes in numerous game studios which produced some of the most popular games in the world.

We spoke about ecommerce previously and Tencent has stake in big players such as JD.com, Meituan, Sea and Pinduoduo.

And not to forget that Tencent is a leading fintech player in China, one that could rival Ant Financial.

Besides its popular WeChat Pay, it invested in banks and discount brokerages.

This is just the tip of the iceberg and there are more investments which were not covered here. Refer to this article for more details.

Conclusion

Even though the three companies are very influential today, their approaches differ:

1. Berkshire Hathaway prefers to buy the entire companies and operate the subsidiaries.
2. Reliance Industries grew their businesses organically in other segments, but partners with foreign tech companies to roll out the tech stack in India.
3. Tencent invest in a large variety of businesses instead of building the businesses from scratch. They often do not have controlling stakes in these businesses.

Regardless, the three companies dominated huge markets in their respective geography – Berkshire Hathaway in the U.S., Reliance Industries in India and Tencent in China. Hence, you can really own a big part of the world by just investing in these three companies.

Would you invest in them, why or why not?

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