GOURMET FOODS Understanding a Holding CompanyThe New Investor’s Guide to Holding CompaniesBy Joshua Kennon Investing for Beginners Expert Berkshire Hathaway is the most famous holding company in the world. Warren Buffett grew it from $8 per share to more than $150,000 per share over the 40+ years he ran the company, making his stockholders extremely rich in the process. When you begin investing for the first time, you are going to encounter something known as a holding company. In fact, many of the most successful companies in the world are really holding companies. This basic introduction the holding company will explain what holding companies are, why you need to understand how they work, and some things to consider before investing in one.The Basics – What Is a Holding Company?A holding company is a company that doesn’t have any operations, activities, or other active business. The Platform Marketer www.platformmarketer.com Instead, it owns assets. These assets can be shares of stock in other corporations, limited liability companies, limited partnerships, private equity funds, hedge funds, publicly traded stocks, bonds, real estate, song rights, brand names, patents, trademarks, copyrights, or virtually anything else that has value. A Sample Holding Company To understand the concept better, imagine that you and I decided we wanted to invest together. We, and members of our family, create a new company called Blue Sky Holding Company, Inc. We file the paperwork with the secretary of state and pay the fees. Then, we issue 1 million shares of stock at $10 per share, raising $10 million in fresh cash. We vote on a Board of Directors, hire one of us as CEO, and build an office. The next day, we show up and start investing the money. We (meaning Blue Sky Holding Company) do several things: • We incorporate a new business called Frozen Treats of America, LLC. It is 100% owned by Blue Sky Holding Company. We contribute $1,500,000 in cash to the business, hire a manager to run it, and open a Dairy Queen franchise that we expect to earn $170,000 in profit before taxes. • We have Blue Sky Holding Company open a brokerage account with Charles Schwab or another major institution. We deposit $3,000,000 in cash into the account and buy a collection of high quality blue chip stocks. We expect these stocks to generate $150,000 in pre-tax dividends each year. • We start a new company called Southworth Hospitality, LLC that is 100% owned by Blue Sky Ho