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Should Warren Buffett Break Up Berkshire Hathaway?

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As the company's shareholders descended on Omaha over the weekend, the big question on everyone's mind was: What will the company be without Buffett?

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This past weekend, while equine aficionados tuned into the Kentucky Derby and tippled mint juleps, much of the investing world was fixated on Omaha for the annual Berkshire Hathaway (NYSE:BRK.A) shareholders' convention.

It's not unusual to meet so-called "Berkshire Millionaires" in Omaha. But this weekend there were more of them. You could have bought shares in the holding company for $11 a share back in 1969. An early $20,000 investment would be worth more than $70 million today.

And 83-year-old Chairman Warren Buffett shows little sign of slowing down. Sure, the New York Times likes to pose the question of whether the Oracle's still got it. But there can be no doubt that Buffett is one of the most respected financial minds in the world. His opinion moves the needle on just about everything, from income inequality to "Too Big to Fail" banks to the sharing economy.  

The big question on everyone's mind this year, though, was Berkshire's plan for life after Buffett.

Check out Warren Buffett's portfolio here.

He has announced a succession plan. And he has no shortage of strong and like-minded candidates to choose from, although some prominent publications such as The Economist are calling for Buffett to break the company up.

Only a man with the reputation and prestige of Buffett could have kept shareholders from demanding participation in the dot-com boom, and such conservatism is a key facet of the firm's success. The Economist's editorial board is skeptical that a replacement could project that kind of authority.

As advocates for a breakup point out, many of the companies in Berkshire's portfolio -- such as Heinz Ketchup -- are fully capable of making it on their own. Taking apart the company in an orderly fashion has the potential to preserve more value in the long run.

In honor of the Oracle, we decided to build a list using his holdings. Starting with a universe of 43 of the largest Berkshire holdings, we screened that list for signs of growing profitability by looking for encouraging accounts-receivable trends.

These trends are noted when revenue outpaces receivables as a percentage of net assets. Since revenue is money in the bank, and receivables are simply money that's "promised," the smaller percentage of your assets that are receivable, the better.

A sixth of Berkshire's holdings made it through the screen. Sure seems like the old man's still got it. Perhaps talks of departure are premature.  


Click on the interactive chart to view data over time.

1. DirecTV, Inc. (NASDAQ:DTV): Provides digital television entertainment in the United States and Latin America. Market cap at $40.33 billion, most recent closing price at $80.76.

Revenue grew by 6.7% during the most recent quarter ($8,594M vs. $8,054M y/y).

Accounts receivable grew by -5.53% during the same time period ($2,547M vs. $2,696M y/y).

Receivables, as a percentage of current assets, decreased from 48.54% to 42.79% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

2. DaVita HealthCare Partners (NYSE:DVA): Provides kidney dialysis services in the United States. Market cap at $14.39 billion, most recent closing price at $69.93.

Revenue grew by 23.62% during the most recent quarter ($3,063.21M vs. $2,477.85M y/y).

Accounts receivable grew by 5.68% during the same time period ($1,844.57M vs. $1,745.43M y/y).

Receivables, as a percentage of current assets, decreased from 60.57% to 53.12% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

3. Procter & Gamble Co. (NYSE:PG): Provides consumer packaged goods in the United States and internationally. Market cap at $222.17 billion, most recent closing price at $82.34.

Revenue grew by 0.47% during the most recent quarter ($22,280M vs. $22,175M y/y).

Accounts receivable grew by -3.79% during the same time period ($6,911M vs. $7,183M y/y).

Receivables, as a percentage of current assets, decreased from 28.06% to 25.16% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

4. Suncor Energy Inc. (NYSE:SU): Operates as an integrated energy company. Market cap at $57.51 billion, most recent closing price at $38.78.

Revenue grew by 7.44% during the most recent quarter ($10,194M vs. $9,488M y/y).

Accounts receivable grew by -7.53% during the same time period ($5,548M vs. $6,000M y/y).

Receivables, as a percentage of current assets, decreased from 42.61% to 37.76% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

5. Visa, Inc. (NYSE:V): Operates retail electronic payments network worldwide. Market cap at $130.01 billion, most recent closing price at $206.09.

Revenue grew by 10.86% during the most recent quarter ($3,155M vs. $2,846M y/y).

Accounts receivable grew by -41.75% during the same time period ($1,748M vs. $3,001M y/y).

Receivables, as a percentage of current assets, decreased from 40.63% to 22.51% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

6. Verisk Analytics, Inc. (NASDAQ:VRSK): Provides proprietary data, analytics methods, and embedded decision support solutions to property and casualty (P&C) insurance, mortgage, and health-care industries primarily in the United States. Market cap at $10.00 billion, most recent closing price at $59.91.

Revenue grew by 14.93% during the most recent quarter ($332.46M vs. $289.26M y/y).

Accounts receivable grew by 0.66% during the same time period ($225.89M vs. $224.41M y/y).

Receivables, as a percentage of current assets, decreased from 57.46% to 47.57% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

7. WABCO Holdings Inc. (NYSE:WBC): Develops, manufactures, and sells braking, stability, suspension, and transmission control systems, primarily for commercial vehicles. Market cap at $6.52 billion, most recent closing price at $106.82.

Revenue grew by 20.75% during the most recent quarter ($720.4M vs. $596.6M y/y).

Accounts receivable grew by 16.02% during the same time period ($397.6M vs. $342.7M y/y).

Receivables, as a percentage of current assets, decreased from 43.24% to 32.2% during the most recent quarter (comparing the three months ending December 31, 2013, to the three months ending December 31, 2012).

Editor's note: This story by James Dennin originally appeared on Kapitall.

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