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Why This American Company Is Surprisingly Important For Singaporean Investors

The operational results of conglomerates with significant operations in Singapore would probably be very important for local investors with regard to gleaning some important insights into how our country’s doing. Companies such as Keppel Corporation (SGX: BN4) and SembCorp Industries (SGX: U96) are local shares with diverse business operations in which significant revenue comes from Singapore (75% for the former and 45% for the latter).

Keppel Corporation has interests in vessel-building, logistics facilities, data centres, and property development among others. Meanwhile Sembcorp Industries counts shipyards and power plants amongst its business assets. And the thing is, those facts described above are probably well-known amongst Singaporean investors especially given how both shares are part of Singapore’s most widely-followed stock market benchmark, the Straits Times Index (SGX: ^STI).

But while it would make sense for investors to focus on local companies, such as those mentioned above, to feel the pulse of Singapore’s economy, there’s also a U.S.-based company that can be surprisingly important for that function too.

When America catches a cold, Singapore sneezes

According to the Department of Statistics Singapore, as a nation, Singapore had exported and imported S$27.44 billion and S$48.20 billion worth of goods and services to/from the U.S.A, respectively, in 2012. This placed the U.S. as the fourth most important trading partner for Singapore back then (behind Malaysia, the European Union, and China, in respective order).

With that as a backdrop, it’s perhaps an understatement to say that the U.S.’s economy is important for the health of our own economy in Singapore. And for an understanding of how well America is doing, the huge U.S.-based conglomerate Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) is surprisingly useful.

Berkshire Hathaway’s link to the American economy

Berkshire Hathaway, which is controlled by none other than Warren Buffett, has more than 80 different operating subsidiaries under its belt and these subsidiaries extend – almost tentacle-like – into many aspects of the American economy. For instance, one of Buffett’s “Powerhouse Five”, “a collection of large non-insurance businesses” that make up a significant portion of Berkshire Hathaway’s profits, includes Marmon.

Back in 2007, Buffett bought over Marmon and called it a “bet on America over a long time.” With “approximately 160 independent manufacturing and service businesses worldwide” today and with a significant chunk of those industrial businesses likely linked to the U.S.A., it’s not hard to see how Buffett’s views on Marmon’s progress could give investors worldwide a glimpse of how well America has done (and would be doing).

That’s not all. Another “Powerhouse Five” company, Burlington Northern Santa Fe (BNSF), owns one of America’s largest rail roads. In Berkshire Hathaway’s annual 2013 Shareholder Letter, Buffett describes his BNSF purchase as such:

Late in 2009, amidst the gloom of the Great Recession, we agreed to buy BNSF, the largest purchase in Berkshire’s history. At the time, I called the transaction an “all-in wager on the economic future of the United States.””

Given such a bold statement – “all-in wager” – it’s not hard to draw a strong connection between the fate of BNSF and the future of the American economy.

Foolish Bottom Line

Marmon and BNSF are just two examples of why one single American conglomerate, Berkshire Hathaway, can be so important for even Singaporean investors to know about.

Tonight, Berkshire Hathaway’s annual shareholder meeting – held in Omaha, Nebraska in the U.S.A. – will commence. And, I’ve made a special trek down to the States this year to be part of this event. In fact, I’m writing what you’re reading now in the sunny-but-cold (it’s about 10 degree Celsius here!) city of Omaha. Over the next few days, I’d be providing coverage and updates about the shareholders meeting where you – dear readers of the Motley Fool Singapore – can learn more about Buffett’s latest thinking with regard to the world of investing and the future of the global economy’s super power, the U.S.A.

Stay tuned!

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing owns shares in Berkshire Hathaway.