The Warren Buffett Way, + Website, 3rd Edition

Chapter 4

Common Stock Purchases

NINE CASE STUDIES

Over the years, Buffett’s common stock purchases have become a part of Berkshire’s folklore. Behind each investment is a unique story. The purchase of the Washington Post Company in 1973 was far different from the 1980 purchase of GEICO. Certainly Buffett’s $500 million investment in Capital Cities, which in turn helped Tom Murphy buy the American Broadcasting Company, was unlike his billion-dollar investment in the Coca-Cola Company. And every one of these stock purchases differed from the investments he made years later in Wells Fargo, General Dynamics, American Express, IBM, and Heinz. But for those of us hoping to understand fully Buffett’s thinking, all these common stock purchases share one very important trait: They allow us to observe his business, management, financial, and market tenets in action.

With the exception of Cap Cities, all of these companies have remained in the Berkshire fold and continue to prosper. Only the Washington Post Company and General Dynamics do not make the list as Berkshire’s top common stock holdings.

In this chapter we examine each purchase in its historical context. This allows us to better analyze Buffett’s thinking at the time of the investment as it relates to the company, the industry, and the stock market.

The Washington Post Company

In 1931, the Washington Post was one of five dailies competing for readers in the nation’s capital. Two years later, the Post, unable to pay for its newsprint, ...