Eight different sources of ‘float’
Regular readers will know I’m somewhat of a Buffett-watcher, not so much for stock picks, but for what we can learn about his approach to business and investing. Buffett is known for his love of insurance companies, with Berkshire owning a range of insurance companies, from GEICO to Berkshire Hathaway Specialty Insurance. One of the major attractions of the insurance business is the ‘float’ that comes with it; customers pay up front and the insurance company doesn’t provide the benefit until later. In the meantime, they get to invest the float. While most companies have to pay to operate their business (working capital), a company with sufficient float is effectively being paid to run their business! It’s not hard to see why Buffett likes float so much. US-based S&C Messina Capital Management are a fan of float too, so they’ve written up a helpful blog article identifying eight different types of business with float: (VIEW LINK)
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