berkshire hathaway & warren buffet

22

Upload: loui-malayil

Post on 14-Jul-2015

267 views

Category:

Business


9 download

TRANSCRIPT

1839- Valley Falls Co - Oliver Chase.

1889- Berkshire Cotton Manufacturing Co

1929- Berkshire Fine Spinning Associates

1888- Hathaway Manufacturing Co-Horatio Hathaway

1955

BERKSHIRE HATHAWAY

First venture of Berkshire Hathaway as a

merged company- Purchase of National

Indemnity Co

1985- Last textile operation was shut

down

In 1979, Warren Buffett’s Berkshire Hathaway began to acquire stock in the ABC television network, adding to and holding those shares for the next several years.

In March 1985, a company named Capital Cities Communications made a surprising $3.5 billion acquisition of ABC, a stunning media buy as ABC was then some four times bigger than Capital Cities.

Warren Buffett and Berkshire Hathaway, it turned out, helped finance the deal. In return, Buffett and Berkshire got a 25 percent stake in the new Cap Cities/ABC colossus, then one of the biggest media concerns on the scene

In 1995, by the time Warren Buffett and Michael Eisner and others were convening at the Sun Valley media fest, Warren Buffett owned 13 percent of Capital Cities/ABC.

“…Here we were, standing together in a parking lot in the middle of Idaho, talking about a $20 billion transaction.”

- Michael Eisner, Disney CEO

Although at first, Eisner and Disney were still nominally in the running to acquire CBS — and Eisner used that as a point of leverage in his talks with Murphy — CBS would be bought by Westinghouse. Disney then made the deal with Cap Cities/ABC — at $19 billion; then the second largest acquisition in corporate history

Berkshire’s 20 million shares of Cap Cites fetched a

pre-tax return in the neighborhood of $2.1

billion. Buffett took his payment in all Disney stock

rather than cash, showing his and Berkshire’s

confidence in Disney.

Buffet: “We wanted the business to be one

That we understand

With favourable long-term prospects

Operated by honest and competent people

Available at a very attractive price”

“We try to buy into business with favourable long term

economics. Our goal is to find an outstanding business at a

sensible price , not a mediocre business at a bargain price.”

“In our opinion , the two are joined at the hip: Growth is always a companion of value.”

Sticks with stocks in your “circle of competence”.

Thinks of investment success as being know how much you know but how realistically you define what you don’t know.

Will improve your ability to ascertain whether the business has favourable long term prospects.

Focus on companies with a clear , sustainable

comparative advantage, or “moat”. A moat will

help protect the company against competitors.

Look for high return on equity , a consistently strong

free cash flow , and limited debt.

Act as if you “own a life time decision card with

only 20 punches on it”. Each time you invest you

have one few investment available for next time.

This will help you look only for best opportunities.

Look for manager who treat the shareholders’

capital with owner-like care and thoughtfulness.

When Buffet buys a business he buys the

management as well. Buffet does not get involved

in day-to-day activities nor helps with major

strategic decisions.

Buffet asks “Is management rational, Is

management candid and does management

resist institutional imperative?”

Look at raw data, not analyst summaries. Focus on understanding the picture , not precise points. “It is better to be approximately right than precisely wrong.”

Understand that majority of stocks are not compelling so ignore them. But when you find stock you like, show conviction and buy a ton of it!

Don’t worry about macro trends. Focus on long term business value- ‘The size of the coupons down the road.’

How has the company performed?

How much debt does the company have?

How are profit margins?

How unique are the products sold by the company?

How much of a discount are shares trading at?

• Warren Buffet was known

for his generous acts of

philanthropy.

• The greatest of it all being

the donation to the Gates

Foundation