Berkshire Hathaway’s (BRK/B) subsidiary Lubrizol seems to be executing quite well according the their CEO James Hambrick. In this article Hambrick says that he plans to increase revenue by about 60%, and that $10 billion in revenue is a reasonable number for this company. The Lubrizol acquisition was clouded by all of the drama surrounding David Sokol, but this is a business that is certainly well within Buffett’s circle of competence.
Initially it was reported that Buffett had concerns about buying Lubrizol due to the belief that they might be experiencing peak margins, but Sokol got him comfortable with the fact that the margins are sustainable. I think that the market price for Berkshire really doesn’t reflect that the majority of the company’s earnings come from operating companies as opposed to investments. Companies like Lubrizol and Burlington Northern don’t trade at book value, and this factor form the crux of our investment thesis in the company.
Full disclosure: Long BRK.B at time of writing.