Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Mueller Industries: This is a Berkshire holding. Buffett is believed to have started buying Mueller Industries, the leading low-cost producer of copper plumbing fittings, tubes, and related products, during the October 2000 sell-off that knocked Mueller down from $32 a share to $21 against solid earnings of $2.16 a share. The company has been in business since 1917 (talk about durable) and has a low-cost infrastructure that allows it to stomp the competition. As of May 2001, Mueller is trading at $34 a share, giving Buffett a superfast 62% return on Berkshire's money. Buffett loves those fall sell-offs.

Price paid: $21 a share (Down from $32)
Earnings: $2.16 a share
Initial return: 10.3%
Per share earnings annual growth rate: -

Nike: Nike is the world's number one shoe company and has more than 40% of the U.S. sports shoe market. This shows up in Berkshire's portfolio, but we don't have any hard information on Buffett's purchase price. We believe he was buying Nike in 1998 and 2000 when it trading below $30 a share. Buying opportunities include a recession in the shoe business, a general recession, and a correction or panic sell-off.

Price paid: <$30 a share Earnings: - a share Initial return: - % Per share earnings annual growth rate: - % USG Corp: USG is the low-cost producer of wallboard and the number one maker of gypsum wallboard in the world. This is a classic bad-news play. As we write, the price of wallboard is falling and the company is facing asbestos litigation, which has dropped the stock's price from $45 a share to $10. Buffett is buying like crazy. So far he has acquired a 15% stake in the company. In June 2001, the company filed for bankruptcy, but many analysts thought this filing would actually help stabilize current operations. The verdict is still out on this one.

Price paid: $10 a share (Down from $45)
Earnings: $ - a share
Initial return: - %
Per share earnings annual growth rate: - %

Yum Brands: This owns three major fast-food brand names: KFC, Pizza Hut, Taco Bell. This is a Berkshire holding. We believe Berkshire begain its purchases in 2000 after the market crash at approximately $24 a share against earnings of $3.65 a share, which equates to an initial return of 15%. As of March 2002, the stock traded at $55 a share.

Price paid: $24 a share
Earnings: $3.65 a share
Initial return: 15 %
Per share earnings annual growth rate: - %


Related articles:
Companies Warren Buffett invested between 1998 and 2001 (Part 1)
Companies Warren Buffett invested between 1998 and 2001 (Part 2)
Companies Warren Buffett invested between 1998 and 2001 (Part 3)
Companies Warren Buffett invested between 1998 and 2001 (Part 4)
Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Companies Warren Buffett invested between 1998 and 2001 (Part 4)

Companies Warren Buffett invested between 1998 and 2001 (Part 4)

Johns Manville: This was a great company in great financial shape until it sold a ton of products loaded with asbestos that made people deathly ill. These people sued Johns Manville by the tens of thousands, pushing it into bankruptcy. The bankruptcy court put 78% of the ownership of the company into a trust in settlement of the lawsuits. Even though the company was making a great deal of money selling nonasbestos products and the stock was publicly traded, investors weren't very interested. Tech stocks were the ticket of the day, not stodgy old insulation companies.
In 2000, Berkshire purchased Johns Manville, the nations's largest manufacturer of insulation products, commercial and industrial roofing, filtration systems, and fiber mats. It paid $1.8 billion for the entire company against pretax earnings of $343.75 million. That equates to a 19% initial pretax return on Berkshire's money. From 1990 to 2000, John Manville grew its per share earnings at an annual rate of 9.5%, which is better than inflation. Buffett could argue that Berkshire bought a bond with an initial pretax return of 19% that would grow at an annual rate of 9.5%.

Price paid: $1.8 billion for entire company
Earnings: $343.75 (pre-tax earnings)
Initial return: 19%
Per share earnings annual growth rate: 9.5%

Justin Industries: Justin Industries makes Acme Bricks and brand-name western boots like Tony Lama. Buffett bought the entire company for $570 million against pretax earnings of approximately $51 million, which equates to a pretax return of approximately 8.9%. Earnings have been growing at 16% a year for the last 10 years. Buffett could argue that he just bought a bond that paid a pretax return of 8.9% that would increase at 16% a year. It beats the static 6% pretax return that treasuries were paying.

Price paid: $570 million for entire company
Earnings: $51 million (pretax earning)
Initial return: 8.9%
Per share earnings annual growth rate: 16%

La-Z-Boy Inc: La-Z-Boy is the number one manufacturer of upholstered furniture in the United States and the number one seller of recliners in the world. This is a Berkshire holding. We believe Buffett started buying La-Z-Boy after the market crashed in February 2000 for $14 a share, on earnings of $1.46 a share. As of June, 2001, it trades at $19 a share. It has been growing per share earnings at 15.7% a year. Expect Buffett to continue buying if he can get it cheap.

Price paid: $14 a share
Earnings: $1.46 a share
Initial return: 10.4%
Per share earnings annual growth rate: 15.7%

Liz Claiborne: This is America's number one seller of clothes and accessories for the career woman. Its clothes are sold in department stores and in its 275 retail outlets. It also makes Donna Karan jeans and Lucky Brand dungarees. It's been in business for more than 20 years. The durable competitive advantage is its brand name, which it stitches to clothing made cheaply in another part of the world.
In 1998, as momentum investors fled low-tech businesses for high-tech businesses, Liz Claiborne saw its stock tumble from a high of $53 a share to a low of $27. Buffett stepped into the market, buying nearly 9% of the company. In 1998, Liz Claiborne earned $2.57 a share against an asking price of $27, which equates to an initial return of 9.5%. By 2000 it was earning $3.43 a share, which equates to a 12.7% return on his initial investment. The longer you stay, the better it gets.

Price paid: $27 a share (Down from high of $53)
Earnings: $2.57 a share
Initial return: 9.5%
Per share earnings annual growth rate: 12.7%


Related articles:
Companies Warren Buffett invested between 1998 and 2001 (Part 1)
Companies Warren Buffett invested between 1998 and 2001 (Part 2)
Companies Warren Buffett invested between 1998 and 2001 (Part 3)
Companies Warren Buffett invested between 1998 and 2001 (Part 4)
Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Companies Warren Buffett invested between 1998 and 2001 (Part 3)

Companies Warren Buffett invested between 1998 and 2001 (Part 3)


GPU Inc: This is a utility holding company that distributes electricity to 2 million people in New Jersey and Pennsylvania. It was serves 1.4 million customers in Australia. This is a Berkshire holding.
We believe Buffett started buying this stock in February of 2000, for around $25 a share, against a book value of $28.46 a share, dividend payout of $2.18, and 1999 per share earnings of $3.25 a share. Buffett's buying opportunity came when the cost of creating energy increased to more than GPU could charge its customers, which caused it to lose $1.74 a share in the second quarter of 2000. To increase rates, the company has to apply to Pennsylavania regulators. If the regulators don't increase rates, GPU will go out of business and the good people of Pennsylvania will go without power. As of May 2001, First Energy, another utility holding company, had made a bid of $36 a share for the company, and the wise regulators of Pennsylvania are considering giving GPU a huge rate increase.

Price paid: $25 a share
Dividend: $2.18 a share
Earnings: $3.25 a share
Book value: $28.46 a share


H&R Block: This company prepares income tax returns. It is currently expanding its financial services group.

HRPT Properties Trust: This is a REIT that focuses on commercial real estate. Its earnings are solid and it pays a dividend every year between $0.88 and $1.51 a share. It is presently repurchasing its shares. We believe Buffett has been buying this stock at a price rumored to be $7 to $8 a share, where it traded for much of 2000. At that price he is getting an initial return of between 12.5% and 20%. We might add that at that price it was considerably below its book value of $11.60 a share - a Grahamian value play? As of May 2001 you could still buy it at $8.90 a share.

Price paid: $7 to $8 a share
Dividend: $0.88 to $1.51 a share
Book value: $11.60 a share
Initial return: 12.5% to 20%


JDN Realty: This is a REIT that develops, acquires, leases, and manages shopping centres in 18 states. It has a book value of $14.80 a share and pays a dividend of $1.20 a share. We believe Buffett started buying its stock at around $9 a share. The book value represents real estate that has been depreciated and is worth far more than it is carried on JDN's books. Buffett bought the stock at an initial return of 13% ($1.20 / $9 = 13%) and as an asset play.

Price paid: $9 a share
Dividend: $1.20 a share
Book value: $14.80 a share
Initial return: 13%



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Companies Warren Buffett invested between 1998 and 2001 (Part 1)
Companies Warren Buffett invested between 1998 and 2001 (Part 2)
Companies Warren Buffett invested between 1998 and 2001 (Part 3)
Companies Warren Buffett invested between 1998 and 2001 (Part 4)
Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Companies Warren Buffett invested between 1998 and 2001 (Part 2)

Companies Warren Buffett invested between 1998 and 2001 (Part 2)

Aegis Realty: This is a real estate investment trust (REIT) that owns and manages three million square feet of shopping-center space. We believe Buffett was buying it in 2000 for around $8 to $9 a share. It pays a dividend of $0.96 a share and has a book value of $14.81 a share. This is an interest play that pays a 10% return and a Grahamian value play that's selling below book value.

Price paid: $8 to $9 a share
Dividend: $0.96 a share
Book value: $14.81 a share
Initial return: 10%


Dun & Bradstreet Corp: This sells business information about other businesses.. Buffett bought this in 1998 because it is a great company and it was about to spin off its lucrative Moody's Investors Services. In spin-offs, the market sometimes fails to fully appreciate the value of the whole divided into separate parts. This is a Berkshire holding, believed to have been purchased in 1999 before the spin-off for approximately $15 a share. As of May 2001, it trades at $27 a share. Moody's Investors Services was spun off on September 30, 2000, at $26 a share, and as of May 2001 it trades at $32 a share. On Buffett's original $15 investment in D&B he made $12 on the D&B side and $32 on the Moody's side for a total profit of $44, which equates to a 293% return on his original investment of $15. Where was the rest of Wall Street? Off chasing tech stocks, of course.

Price paid: $15 a share


First Data Corp: This company process those millions of credit card transactions. It's a fantastic business with which Buffett has long been fascinated. This is a Berkshire holding.
Buffett started buying it in 1998 during a fall contraction/panic sell-off that dropped its price down to $20 a share against earnings of $1.56 a share, which equates to an initial return of 7.8%. It's per share earnings had a 15% annual rate of growth. In May 2001 its stock was trading at $66 a share, which equates to a 48% compounding annual rate of return.

Price paid: $20 a share
Earnings: $1.56 a share
Initial return: 7.8%
Per share earnings annual growth rate: 15%


Furniture Brands International: Buffet probably saw this one in Value Line, did his scuttlebutt at the Nebraska Furniture Mart, and discovered that Furniture Brands International was the number one manufacturer of residential furniture in America. This is a Berkshire holding.
We believe that he started buying it in 2000 for around $14 a share against earnings of $1.92 a share, which equates to an initial return of 13.7%. Its per share earnings have been growing at an annual rate of 28%. This is a great business. Everyone buys furniture at some time or another, and FBI is there to sell it to them. It has been in business since 1921 and has strong earnings and great returns on equity and total capital. Over the years it has come to dominate its field. Buffett bought after the 1999 bubble burst. It didn't stay down long. By February 2001 it was trading at $25 a share, giving Buffett a quick 79% return on his money.

Price paid: $14 a share
Earnings: $1.92 a share
Initial return: 13.7%
Per share earnings annual growth rate: 28%



Related articles:
Companies Warren Buffett invested between 1998 and 2001 (Part 1)
Companies Warren Buffett invested between 1998 and 2001 (Part 2)
Companies Warren Buffett invested between 1998 and 2001 (Part 3)
Companies Warren Buffett invested between 1998 and 2001 (Part 4)
Companies Warren Buffett invested between 1998 and 2001 (Part 5)

Companies Warren Buffett invested between 1998 and 2001 (Part 1)

Companies Warren Buffett invested between 1998 and 2001 (Part 1)

These are companies Warren Buffett invested either personally, through his foundation, or through Berkshire Hathaway. Be aware that simply because Warren Buffett has made investments in these companies or they met his selective criteria doesn't mean he would buy them today. He bought when the price was right. Remember: You want to identify the company with a durable competitive advantage and then let the price of its shares determine when you pull the trigger. The right price may come tomorrow or it may come five years from now.

Also keep in mind that at times Mr. Market is wildly enthusiastic about some of these businesses and prices them high. On other days he will be very pessimistic about their prospects and price them low. You are interested in the days that Mr. Market is pessismistic, not the others.


Related articles:
Companies Warren Buffett invested between 1998 and 2001 (Part 1)
Companies Warren Buffett invested between 1998 and 2001 (Part 2)
Companies Warren Buffett invested between 1998 and 2001 (Part 3)
Companies Warren Buffett invested between 1998 and 2001 (Part 4)
Companies Warren Buffett invested between 1998 and 2001 (Part 5)