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What is a conglomerate

A conglomerate is a giant company that owns a number of other companies, often in completely different and unrelated industries. Think of it as a huge umbrella company that deals with everything from insurance to fast food.
📅 29. April 2026 👁️ 4 views 📂 Grunnleggende 🇳🇴 Les på norsk

When you buy a share in a regular company, you know exactly what you are getting. If you buy Equinor, you get energy. If you buy Telenor, you get telecom. But what if you buy a share that gives you ownership in an insurance company, a battery manufacturer, an ice cream chain, and a railroad, all at once? Then you have bought a conglomerate.

The most famous example in the world is Warren Buffetts company, Berkshire Hathaway. In Norway, we have historically had Orkla, which at one point owned everything from pizza and chocolate to media houses and aluminum plants, before they decided to focus more strictly on consumer goods.

"Every great work has been considered impossible before it was accomplished."
— Florence Scovel Shinn

Managing a conglomerate is a great accomplishment. The top management (the parent company) rarely interferes in the daily operations of the smaller companies (the subsidiaries). Their only real job is to collect all the profits, and then decide which of the companies should receive money to grow further.

The conglomerate discount

A very well known phenomenon in the stock market is the so-called conglomerate discount. This means that the value of the conglomerate itself is often lower than the sum of all the small companies if they had been sold separately. This happens because investors often prefer to choose their own industries, instead of letting a top executive force them to own a little bit of everything.

Ruler of companies: A conglomerate often produces nothing itself. It is a holding company on steroids, which exists solely to own the shares of the companies that actually do the work.

Pros and cons

Advantages

  • Enormous spread of risk (diversification). If ice cream sales go poorly, they might make money on insurance instead.
  • Profits from mature, boring companies can be used to finance new and exciting projects within the group.
  • Withstands economic downturns much better than companies that only do one thing.

Disadvantages

  • It can become incredibly bureaucratic and slow.
  • Difficult for you as an investor to analyze, since the financial statements are a massive jumble of hundreds of companies.
  • Often suffers from a conglomerate discount because the company becomes too complex for the market.

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