Warren Buffett's Historical Investments (Part 8)

Warren Buffett's Historical Investments (Part 8)

Pepsico inc.: Before Warren started drinking three or four Cherry Cokes a day, he was a Pepsi man. PepsiCo is a fantastic company with an annual ROE for the last 10 years of over 20% and per share earnings growing annually at 8%. This is a Buffett Foundation holdings. Look to buy it in a recession, or during a panic sell-off.

ROE: 20% (the last 10 years)
Per share earnings annual growth rate: 8%


Times Mirror: In 1980, the Fed pushed interest rates up to the 14% level, which killed stock prices. Buffett put on his selective contrarian hat and went shopping. One of his purchases was Times Mirrow, owner of the Los Angeles Times, for an amazing $14 a share against per share earnings of $2.04, which equates to a P/E of 6.8 and an initial return of 15%. By 1985 it was trading at $53 a share, giving Buffett a 30% compounding annual rate of return. During the 1999 bubble it traded at 21 x earnings. You can't trade this one anymore - in March 2000 Tribune Company saw the great opportunity here and bought the company.

Price bought: $14 a share (in 1980, PE 6.8x)
Earnings: $2.04 a share
Initial return: 15%
Price in 1985: $53 a share giving a CAGR of 30%
PE in 1999 (bubble): 21x


Torchmark Corp: This is an insurance and financial services company. It consistently earns a ROE in excess of 19%. Its per share earnings have been growing at an annual rate of 10.9% for the last 10 years. Buffett has been buying this one for years, most recently in February 2000 right after the 1999 bubble. You could have bought it then at $20 a share with earnings of $2.82 a share, which equates to an initial return of 14%. As of May 2001, it traded at $37.50 per share.

ROE: 19% (the last 10 years)
Per share earnings annual growth rate: 10.9% (the last 10 years)
Price bought: $20 a share (in February 2000, after the 1999 bubble)
Earnings: $2.82 a share
Initial returns: 14%
Price in May 2001: $37.50



Wal-Mart Stores: With over 2,400 stores, Wal-Mart has the power to outbuy the competition. This means it can give its customers a better buy on just about anything. Thus every price-conscious consumer shops there. More shoppers mean more volume, which means more money. How much? Wal-Mart's annual ROE for the last 10 years has always been over 20%. Its per share earnings have been growing at an annual rate of 24%. It is, after all, the world's largest retailer. It got that way by going into small towns and driving the competition out of business, thus establishing a monopoly. Its distribution network is so sophisticated that it has created a barrier to entry that protects the company from competition. Berkshire reported that it owned 4.39 million shares of Wal-Mart as of 1997.

ROE: > 20% over the last 10 years.
Per share earnings annual growth rate: 24%


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)