Monday, July 19, 2010
Thursday, July 15, 2010
See's Candy
Warren Buffett bought See's Candy in 1972 and still owns it today. In 1972, Warren Buffett paid $us 25 for it. The company made a profit of $us 4 million a year before taxes in 1972. It sold 16 million pounds of candy a year at $us 1.95 per pound, meaning 16 million times $us 1,95 = $us 31.2 million a year in sales. Before buying the company, Warren Buffett and his partner Charlie Munger thought and asked themselves if there was some untapped pricing power at See's Candy, meaning that if that $us 1.95 a pound could sell for a little bit more - up to $us 2.00 or $us 2.25, hence in 16 million pounds sold, that could mean $us 4 million in profit in one year. And there indeed was some untapped pricing power in there.
Charlie Munger and Warren Buffett knew that See's Candy had a very good reputation, especially in the minds of Californians, thus they knew that the prices could indeed be raised. Thus, once they bought the business, they raised the price of the pound of candy every year on the 26th of December - the day after Christmas. In 1998, the pound was sold for $us 11 each, and 30 million pounds were sold, thus sales amounted to $us 330 million. Profit is $us 2 per every $us 11 pound that is sold. Thus, in 1998, the profit was $us 60 million.
$us 55 million out of those $us 60 million are made on the 3 weeks before Christmas. Valentine's Day is the biggest day of sales, and on that day, Warren Buffett runs adds on TV, newspapers, and TV that say "guilt - guilt" to every husband and boyfriend in the West Coast - so if they arrived home on that day without See's Chocolates it would be a big mistake. See´s Chocolates are the expensive and best ones; just like Coke and happiness go together - not RC Cola.
Charlie Munger and Warren Buffett knew that See's Candy had a very good reputation, especially in the minds of Californians, thus they knew that the prices could indeed be raised. Thus, once they bought the business, they raised the price of the pound of candy every year on the 26th of December - the day after Christmas. In 1998, the pound was sold for $us 11 each, and 30 million pounds were sold, thus sales amounted to $us 330 million. Profit is $us 2 per every $us 11 pound that is sold. Thus, in 1998, the profit was $us 60 million.
$us 55 million out of those $us 60 million are made on the 3 weeks before Christmas. Valentine's Day is the biggest day of sales, and on that day, Warren Buffett runs adds on TV, newspapers, and TV that say "guilt - guilt" to every husband and boyfriend in the West Coast - so if they arrived home on that day without See's Chocolates it would be a big mistake. See´s Chocolates are the expensive and best ones; just like Coke and happiness go together - not RC Cola.
Friday, July 2, 2010
When to sell a business
"Is this business going to produce more and more money over the years? If the answer is yes - then THAT'S the way to look at a business." WARREN BUFFETT. Thus, only sell a business or shares in a business that looks at the short term, and not the long.
On Wall Street
"Wall Street makes its money on activity, but you make your money on inactivity." "In Wall Street you think you have to do something everyday! ... but once every 6 months when I go to Wall Street, I get to go back to Omaha to think about what I should do." WARREN BUFFETT.
On Looking Back at Mistakes
On learning from mistakes: "I really believe it's really better to learn from other people's mistakes as much as possible. But, we don't spend any time looking back at Berkshire. I've got a partner, Charlie Munger, we've been pals for 50 years, we never had an argument, we disagree on things a lot, but we don't have arguments about it, and we never look back! We just figure there is so much to look forward to that there is just no sense thinking about what we might, it just doesn't make any difference, I mean you can only live life forward and you can learn something perhaps from the mistakes, but the big thing to do is to stick with the businesses you understand." WARREN BUFFETT.
More Martin S. Davis of Gulf & Western
Sharpening the Focus
Martin Davis is reshaping Gulf & Western to make it a player in the developing battle of global communications powers.
April 12, 1989|PAUL RICHTER, L.A. Times Staff Writer
NEW YORK — Martin S. Davis became chief executive of Gulf & Western in 1983, when corporate raiders like Carl C. Icahn and Carl Lindner were buying the giant conglomerate's stock in hopes of forcing a merger that would earn them millions.
Ivan F. Boesky, the fallen stock speculator, even plopped down on a sofa in Davis' Manhattan office one day and tried to pressure him into moves to increase the value of Boesky's stake. "He had an armed bodyguard waiting for him outside, so I can't say I threw him out," Davis said. "But I asked him to leave."
Boesky and the raiders got the message. They soon sold their shares and haven't mounted a serious challenge to Gulf & Western since, though the company has never bothered to put the standard anti-takeover defenses in place.
New Evidence of Resolve
Davis has often shown such determination in the past six years, as the Bronx-born, 61-year-old executive has reshaped Gulf & Western from a ragtag agglutination of about 100 businesses to a thriving corporation focused in entertainment, publishing and finance. This week, Davis' resolve was evident again, as he announced that Gulf & Western will sell its huge consumer finance business to try to evolve into an even larger global entertainment and media firm.
Davis' plan is to auction the finance arm, Associates Corp., then reinvest the $3 billion-plus of proceeds in new entertainment and media companies. The acquisitions will complement holdings that include the Paramount movie and TV studio, the big Simon & Schuster and Prentice Hall publishing businesses, and interests in cable networks, TV stations and sports teams.
The goal is to make Gulf & Western a player in the developing free-for-all between such global communications giants as Rupert Murdoch's News Corp., the now-forming union of Time Inc. and Warner Communications, the West German Bertelsmann AG, and the French Hachette SA.
Davis makes clear that he will try to reach the new goal by urging on his troops in the way that has given him a reputation as one of corporate America's toughest bosses. "Weak people have a problem, with themselves as well as with me," he says. "I don't work well with incompetents."
Martin Davis is reshaping Gulf & Western to make it a player in the developing battle of global communications powers.
April 12, 1989|PAUL RICHTER, L.A. Times Staff Writer
NEW YORK — Martin S. Davis became chief executive of Gulf & Western in 1983, when corporate raiders like Carl C. Icahn and Carl Lindner were buying the giant conglomerate's stock in hopes of forcing a merger that would earn them millions.
Ivan F. Boesky, the fallen stock speculator, even plopped down on a sofa in Davis' Manhattan office one day and tried to pressure him into moves to increase the value of Boesky's stake. "He had an armed bodyguard waiting for him outside, so I can't say I threw him out," Davis said. "But I asked him to leave."
Boesky and the raiders got the message. They soon sold their shares and haven't mounted a serious challenge to Gulf & Western since, though the company has never bothered to put the standard anti-takeover defenses in place.
New Evidence of Resolve
Davis has often shown such determination in the past six years, as the Bronx-born, 61-year-old executive has reshaped Gulf & Western from a ragtag agglutination of about 100 businesses to a thriving corporation focused in entertainment, publishing and finance. This week, Davis' resolve was evident again, as he announced that Gulf & Western will sell its huge consumer finance business to try to evolve into an even larger global entertainment and media firm.
Davis' plan is to auction the finance arm, Associates Corp., then reinvest the $3 billion-plus of proceeds in new entertainment and media companies. The acquisitions will complement holdings that include the Paramount movie and TV studio, the big Simon & Schuster and Prentice Hall publishing businesses, and interests in cable networks, TV stations and sports teams.
The goal is to make Gulf & Western a player in the developing free-for-all between such global communications giants as Rupert Murdoch's News Corp., the now-forming union of Time Inc. and Warner Communications, the West German Bertelsmann AG, and the French Hachette SA.
Davis makes clear that he will try to reach the new goal by urging on his troops in the way that has given him a reputation as one of corporate America's toughest bosses. "Weak people have a problem, with themselves as well as with me," he says. "I don't work well with incompetents."
Subscribe to:
Posts (Atom)