Another year has passed, and the Oracle of Omaha is now 82 years old (DQ Ice Cream Cake, anyone?); despite his age, Warren continues to lead Berkshire with gusto, building value for owners along the way. Let’s take a look back at some deals that, like Warren, have only gotten better with time:
See’s Candy – this business was purchased by Berkshire (via Blue Chip Stamps) for $25 million in 1972; in 2011, See’s recorded pre-tax earnings of $83 million – bringing the total since Berkshire’s purchase to $1.65 billion.
Nebraska Furniture Mart – founded in 1937 (seven years after Warren was born), and purchased by Berkshire nearly half a century later (1983) for $60 million; in the most recent year, NFM made more than 10x what it made in the year Berkshire acquired it – an estimated $150 million.
Coca-Cola – Likely Berkshire’s most well known investment, Warren began secretly accumulating shares in 1988 (and was soon figured out by his neighbor and Coca-Cola President Don Keough, who promised to keep quiet until Berkshire was required to disclose their stake) and spent just over $1 billion acquiring KO shares – equal to 35% of Berkshire’s entire common stock portfolio at the time. As of the end of 2011, Berkshire Hathaway owns 8.8% of the Coca-Cola Company, with a market value of $14 billion.
Burlington Northern Santa Fe – In February 2010, Berkshire acquired the remaining 77.5% of BNSF they did not already own for $26.5 billion (implied value of the company - $34.2B). In 2011, revenues were up 16% to $19.55 billion and net earnings increased 21% to $2.97 billion; with the railroad industry looking materially stronger through the first half of the year, this investment is looking to be yet another winner for the shareholders of Berkshire Hathaway.
In addition to fantastic investments, Warren has left us with some great quotes (on business, investing, and life in general) over the years; here are a few of my personal favorites:
On One’s Reputation - It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.
On Friends & Associates - It's better to hang out with people better than you. Pick out associates whose behavior is better than yours and you'll drift in that direction.
On Investing - I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
On Simplicity - The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.
On His Children – I want to give my kids enough so that they could feel that they could do anything, but not so much that they could do nothing.
Happy 82nd Birthday Warren!
About the author:
As it relates to portfolio construction, my goal is to make a small number of meaningful decisions. In the words of Charlie Munger, my preferred approach is "patience followed by pretty aggressive conduct." I run a concentrated portfolio, with a handful of equities accounting for the majority of my portfolio (currently two). In the eyes of a businessman, I believe this is adequate diversification.