Warren Buffett's Historical Investments (Part 9)

Warren Buffett's Historical Investments (Part 9)

Warner-Lambert Company: This is a pharmaceutical, consumer health care, and gum and mint company. It has such brand-name products as Listerine, Bromo-Seltzer, Halls cough tablets, Rolaids antacids, Schick and Wilkinson Sword razors and blades. its gums and mints division owns Dentyne, Trident, Freshen-up, Bubblicious, Mondo, Cinn-a-Burst, Clorets, and Certs. Its over-the-counter drugs are protected by patents. The ROE is consitently above 30% and per share earnings have been growing at 11% annually for the last 10 years. During the 1990 bubble it traded at a PE of between 30 and 45. If you can get it for a PE of below 17, the economics really work. In the early nineties, when it looked as if the federal government was going to start regulating drug prices, rumour had it that Buffett was buying into this company at a PE of 13. He then sold out because he couldn't establish the large positions that would give him greater weight in dealing with management. In 2000 the company merged into Pfizer.

ROE: > 30% (for last 10 years)
Per share earning annual growth rate: 11% (for the last 10 years)
PE in 1990 bubble: 30 - 45
Price bought: PE of 13 (in early 90s, when fed was going to start regulating prices)



Washington Post: The Washington Post was Buffett's first taste of owning a monopoly newspaper and the incredible profits that it can earn. This one had a majority owner who kept a close eye on things, namely Katharine Graham. She and Buffett hit it off big after he bought into the paper in 1973. He coached her on the virtues of share repurchases and how not to venture into areas of business outside the company's circle of competence. A quick learner, she caused the stock to rise from the $5.60 a share Buffett paid for it in 1973 to more than $500 a share today. The ROE for this company fluctuates between 13% and 19%. Its per share earnings have been growing at approximately 9% annually. In addition to the newspaper, the Washington Post Company owns Newsweek magazine, six TV stations and numerous cable TV systems in eighteen states. It is doubtful that the company will do anything stupid that would create a buying opportunity, so you are going to have to wait for a recession in advertising rates or a general stock market decline to buy. Since the long-term picture of the company looks sound, any price under $400 a share should be a good buy, and any price under $300 a share is a screaming bargain. Buffett bought the Washington Post during the 1973-74 crash for $5.69 a share against earnings of $0.76 a share, which equates to a PE of 7.5. During the 1972 and 1999 bubbles it traded at a PE of 24. Katharine has passed on, but her life's work, the Post, remains a fantastic business.


Price bought: $5.69 a share (at PE of 7.5, during the 1973 - 74 crash)
Earnings: $0.76 a share
ROE: 13% - 19% (for last 10 years)
Per share earnings annual growth rate: 9%
Price in 2001: $500 a share



Wells Fargo: This is the bank of banks and it is growing by leaps and bounds. Buffett bought into it during a banking recession in which just about every major bank in the nation took a bath over bad real estate loans. The stock market, being shortsighted, exited stage right and drove the bank's stock down to $15.75 a share. Buffett, exploiter of short-term folly that he is, jumped on this one with $497.8 million to buy 28.8 million shares at an average price of approximately $17. It has recently traded at $49 a share. In 1999, at the top of the real estate boom, Buffett exited stage left and started selling his shares. Here we have Buffett buying in during a recession and selling out during a boom. Banks go through this boom-and-bust real estate cycle every 10 to 15 years. The shortsighted stock market panics when things go bust and sends bank socks into the ground. When things boom again, the short-sighted stock market sends bank stocks skyward. Anyway you look at it, it's a nice ride. You can do what Buffett does and buy the strongest of the litter.


Price bought: average price $17 (during a banking recession that drove the bank's stock down to $15.75)
Price sold: during the top of the real estate boom in 1999


Wyeth: This drug company is a leading manufacturer of patented prescription drugs, but it also owns some wonderful over-the-counter brand names such as Advil, Anacin, Robitussin, and Chap Stick. The ROE for the last 10 years has always been over 30%. Per share earnings growth has been at 7.9%. At the right price, it's a great buy, and worth holding on to for the long term. People have a habit of getting sick, and that's not going to change anytime soon. Your big buying opportunities will be bear markets and panic sell-offs during bull markets.


ROE: 30% (over the last 10 years)
Per share earnings annual growth rate: 7.9%
Price bought: At the right price; best buy during bear markets and panic sell-off during bull markets.
Price sold: Worth holding on to for the long term.


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)