Berkshire Hathaway Inc

The filings show returns below a quality-compounder test, so the engine's fails_tests verdict stands.

Berkshire Hathaway owns insurance, the BNSF railroad, the BHE energy group and a large set of manufacturing, service and retailing businesses, and reported revenue of $371.4B for the latest year. Return on equity averaged 11% across the years measured and was 9.8% in 2025, below the level a quality-compounder test asks for. Net income fell to $67.0B and owner earnings to $59.5B, so the cash an owner could take out is lower than in the years before. The balance sheet is strong: debt to equity is 0.0× and net cash is $52.6B. We cannot give a valuation, because the filings do not report a diluted share count, so the share price of $532.02 cannot be set against an estimate of value.

Berkshire owns a group of businesses that it runs through subsidiaries, and it reports revenue of $371.4B for the latest year. The main sources are insurance, the BNSF railroad, the BHE energy group, and manufacturing, service and retailing businesses. Insurers collect premiums before they pay claims, so they hold a pool of money called float that can be invested. The filing says the cost of float has been negative in each of the last three years, because underwriting produced pre-tax gains.

• Insurance underwriting results at GEICO and BH Primary
• Investment income on float, mainly U.S. Treasury Bills
• BNSF railroad operating earnings
• BHE utility and energy margins
• Manufacturing, service and retailing earnings

Inside the circle? The main businesses have long operating histories and clear economics, so a careful owner can understand how each one earns money. Reported earnings still swing a lot, with return on equity averaging 11% and falling to -4.6% in the weakest year. The filing also says management is currently unable to reliably predict the impact of current events, which limits how far ten years out can be estimated.

Berkshire's protection comes from several separate places, and the filing does not claim one single moat. The railway and the regulated utilities are the clearest examples: BNSF operates one of the largest railroad systems in North America, and BHE's utility rates are set through a regulatory process. Insurance is harder to call a moat. Return on equity averaged 11% over the years measured, with a low of -4.6% in the weakest year, and the filing says underwriting earnings may decline from competition and claim costs. The data supplied does not include operating or gross margins, so we cannot check the margin history against the filing's claims. On the current evidence, the protection looks narrow and tied to specific businesses rather than durable across the whole group.

The filing excerpts supplied for this review do not cover share buybacks, dividends or the share count, so we cannot test repurchases against intrinsic value or check the one dollar retained test. What the excerpts do show is a clear stance on insurance float and cash: management says the average cost of float was negative in each of the last three years, and it puts safety ahead of yield on short-term investments. Management is also plain about what it cannot forecast, saying it is currently unable to reliably predict the ultimate impact of current events. The main caution is that management calls investment gains and losses meaningless for judging periodic results, which can soften the reader's view of swings in equity holdings, and the filing records impairments on two of those holdings. You should treat this as a partial read, because the excerpts leave out the capital return data that would settle the question.

• The excerpts give no buyback, dividend or share-count detail, so the dividend payout metric of 0.0% is the only capital return figure available here.
• Net cash stands at $52.6B and debt to equity is 0.0×, which fits the Buffett preference for little or no debt.
• Capital spending runs at 1.4× depreciation, with maintenance capex estimated at $20.9B, so the business still needs steady reinvestment to hold its position.
• Retained earnings over the period total $492.3B, but without a price history the one dollar retained test cannot be run.

• FailsHigh returns on equity without leverageFails

  Return on equity averaged 11%, reaching 15% in 3 of the years measured; the weakest year was -4.6%.

  Why this test
• MixedDemonstrated, consistent earning powerMixed

  One loss year across 15 years of filings.

  Why this test

Discount rate: 10-year Treasury (5.1%) plus a 3% hurdle. End-of-day prices from free public sources, may be delayed or missing.

Buffett's test of managerial economics is a high earnings rate on equity without undue leverage. On that test, returns are the weak point. Leverage is not. The circle of competence principle also matters here: the railway and the regulated utilities are the easiest parts to understand, while the filing says that management is currently unable to reliably predict the ultimate impact on its businesses ([0001193125-26-083899:mdna:1]). Owner earnings, the cash an owner could take out, stand at $59.5B against $72.5B on a normalised basis, so the picture depends on which year you choose. The margin of safety principle cannot be applied without a share count. Buffett's point that interest rates are gravity for valuations is also relevant, with the ten-year Treasury yield at 5.1%. Float is a real strength. The filing says the average cost of float was negative in each of the last three years, which Buffett would count in its favour. Float is still exposed to lower interest income, as the filing records.

• Return on equity in future annual reports, measured against the level the quality-compounder test asks for

  A return near that level would be the first sign that the fails_tests result has changed.

• The diluted share count, plus any repurchases or dividends in the next annual report

  The filings supplied do not report a diluted share count, so per-share value and the retained earnings test cannot be checked.

• Insurance underwriting earnings and the GEICO loss ratio

  The filing says earnings may decline from competition and rising claim costs, and the case for float depends on underwriting staying profitable.

• Impairments on Kraft Heinz and Occidental, and other marks on equity holdings

  The filing records other-than-temporary impairment losses on both holdings, and management says investment gains and losses are generally meaningless for judging periodic results, so you need to judge those holdings yourself.

• Losses from retroactive reinsurance and changes in reserve estimates

  The filing says deferred charge balances will be charged to earnings over the remaining claims settlement periods, which reduces earnings in future years.

Questions the filings couldn't answer

• What is the diluted share count, and so what is the per-share intrinsic value against the share price of $532.02?
• How will the OxyChem business, acquired on 2 January 2026, change the capital needs and returns of the group?