Warren Buffett took control of Berkshire Hathaway (BRK.A 1.85%) (BRK.B 1.61%) in 1965. In hindsight, he has described the company as a “one-trick pony, the owner of a venerable — but doomed — New England textile operation.” However, during the last six decades, Buffett turned Berkshire into one of the most successful businesses on the planet.

Indeed, Berkshire hit an important milestone on Aug. 28. It became the seventh U.S. company to achieve a trillion-dollar valuation. The other six companies are listed below by market capitalization:

• Apple: $3.5 trillion
• Microsoft: $3.1 trillion
• Nvidia: $2.9 trillion
• Alphabet: $2.0 trillion
• Amazon: $1.8 trillion
• Meta Platforms: $1.3 trillion

Berkshire shares have gained more than 5,600,000% under Buffett’s leadership, and no one has benefited more than him. Buffett is worth $147 billion, making him the sixth-richest person in the world, and more than 99% of that total is tied up in Berkshire stock.

Buffett has not trimmed his stake in 18 years, and he has no plans to do so, which speaks to his conviction in the company. Here’s what investors should know about Berkshire.

Berkshire Hathaway is the world leader in insurance float

Berkshire Hathaway owns a diverse group of subsidiaries, ranging from insurance to railroads to energy. Insurance is the one you should focus on first, because it unlocks so much value for the rest of the company.

Berkshire Hathaway is the third-largest property and casualty insurance company, behind State Farm and Progressive. Its insurance holdings — most notably Geico — are particularly important because they generate cash in the form of premiums. Buffett explained the benefit to the company simply in his 2009 investor letter: “This collect-now, pay-later model leaves us holding large sums — money we call ‘float’ — that will eventually go to others. Meanwhile, we get to invest this float for Berkshire’s benefit.”

Importantly, accumulating float has historically cost Berkshire less than nothing because the company has shown discipline in underwriting policies. For instance, the company achieved a combined ratio of 87% in the second quarter, below the industry-average of 101.5%. A combined ratio under 100% indicates profitable underwriting. So, Berkshire’s underwriting activities were profitable during the quarter (and better than average), meaning the company was effectively paid to accumulate float.

Buffett has used that cash to buy other companies and build a sizable portfolio of fixed-income securities (U.S. Treasury bills and corporate bonds) and equity securities (stocks). Those investments have steadily created value for shareholders. Berkshire’s book value per share increase at 10.4% annually over the last three years, outpacing the S&P 500‘s annualized return of 8.3%.

Berkshire Hathaway looked strong in the second quarter

Berkshire reported solid financial results in the second quarter. Revenue increased 1.2% to $93.7 billion, and operating earnings — a better indicator of Berkshire’s performance than ordinary net income, because it excludes the ups and downs of the stock portfolio — increased 16% to $11.6 billion. The driving force behind that profitability was the insurance segment. Operating earnings declined modestly across the other segments.

Importantly, Buffett is allowed to repurchase Berkshire stock whenever he believes shares trade at a discount to their intrinsic value. He spent $345 million on share repurchases in the second quarter, the smallest amount in six years, despite have a record $277 billion in cash and Treasury bills on the balance sheet.

Accordingly, Buffett must have believed Berkshire stock was more expensive during the second quarter (relative to its intrinsic value) than it has been in at least six years. And since Berkshire recently attained a trillion-dollar valuation for the first time, meaning the stock recently hit a record high, it’s fair to assume Buffett believes Berkshire stock is even less attractive today.

That said, Wall Street expects Berkshire’s operating earnings to increase at 17% annually through 2027. That estimate makes the current valuation of 24 times operating earnings look reasonable. I think patient investors can buy a very small position today, but bear in mind that Buffett has pulled back on his share repurchases.