Warren Buffett's Historical Investments (Part 2)

Warren Buffett's Historical Investments (Part 2)

Bristol-Myers Squibb: This company sold about $22 billion in proprietary medical products, ethical pharmaceuticals and health and beauty products in 2000. It has been in business since 1887, and unless people are going to stop getting sick, it is going to be in business for a long time to come. We believe Buffett was buying it in 1993, on the threat of government regulation, for around $13 a share, with earnings of $1.10 a share and historical returns on equity and capital of over 30%. So far Buffett has earned a 23% average annual return on this investment.


Price bought: $13 a share (in 1993, on threat of government regulation)
Earnings: $1.10 a share
Historical ROE and ROTC: >30%



Campbell Soup: Campbell's has 70% of the condensed-soup market. It also owns Franco-American, V8, Swanson, Pepperidge Farm, Vlasic, Mrs. Paul's, Prego, and dozens of other brand names that you might find in your grocery basket. The durability of this company's competitive advantage is amazing. Winter comes along and people start buying soups. Look for recessions, panic sell-offs, a warm winter, which can hurt soup sales, or just a business screwup to make the stock attractively priced. This company shows up in the Buffett Foundation holdings. Soup is good food and so is the stock at the right price.


Price bought: Stock became attractively priced during recessions, panic sell-offs, a warm winter (all these hurt soup sales) or business screwup.



Capital Cities Communications: This acquired ABC, when was then acquired by Disney: Buffett loves owning television stations because they make a lot of money and are cheap to run - you buy a transmitter, put up an antenna, plug it into the wall, and you're in business. Network affiliated TV stations make money because they are key advertising bridges that businesses have to use to reach potential consumers. Capital Cities owned a bunch of television stations and cable TV networks and was incredibly well run. Buffett owned the company in the late seventies and then sold it in the early eighties, which he admitted was a mistake.


Price bought: in late 70s
Price sold: in early 80s (Buffett admitted selling this was a mistake)


When it acquired ABC, back in 1986, it needed an equity infusion, so the CEO asked Buffett whether he wanted in. Buffett made an offer and the company said yes. He bought $515 million worth, paying $17.25 a share and then sold out (in a cash-and-stock deal) when Disney acquired Capital Cities in 1995 for $127 a share. That equates to a 24% compounded annual return on his 1986 investment. Another lesson in the long-term-hold department.


Price bought: $17.25 a share (1986, Capital Cities required equity infusion)
Price sold: $127 a share (1995, acquired by Disney)




Cleveland-Cliffs Iron Company: This is the largest supplier of iron ore products to North American steel companies. It owns and operates 5 iron ore mines with several large steelmakers. The company has been around since 1840. What makes it interesting is that during a recession in the steel business it simply closes down the mines until demand returns. Buffett first bought shares in this company during the 1984 steel industry recession and sold it after the industry recovered.

Price bought: Acquired in 1984 during the steel industry recession
Price sold: When steel industry recovered after the 1984 steel industry recession.

The most recent buying opportunity with this company occurred in 2001 when an overabundance of iron ore met a recession in the steel industry, which killed iron ore prices and sent the stock tumbling from a high of $50 to a low of $14. The company's durable competitive advantage is that it is tied in with the steel companies and can stop production and cut expenses without damaging its competitive advantage. You buy this one in a recession and sell when it's over.


Price bought: $14 Buy during a recession. ( Down from $50 due to recession in the steel industry)
Price sold: Sell when when steel recession is over.


Related topics:
Warren Buffett's Historical Investments (Part 1)
Warren Buffett's Historical Investments (Part 2)
Warren Buffett's Historical Investments (Part 3)
Warren Buffett's Historical Investments (Part 4)
Warren Buffett's Historical Investments (Part 5)
Warren Buffett's Historical Investments (Part 6)
Warren Buffett's Historical Investments (Part 7)
Warren Buffett's Historical Investments (Part 8)
Warren Buffett's Historical Investments (Part 9)