Investment banking

4.  1839- Valley Falls Co - Oliver Chase.
 1889- Berkshire Cotton Manufacturing Co
 1929- Berkshire Fine Spinning Associates
 1888- Hathaway Manufacturing Co-
Horatio Hathaway
1955
BERKSHIRE HATHAWAY

5.  First venture of Berkshire Hathaway as a
merged company- Purchase of National
Indemnity Co
 1985- Last textile operation was shut
down

11.  In 1979, Warren Buffett’s Berkshire Hathaway began to
acquire stock in the ABC television network, adding to and
holding those shares for the next several years.
 In March 1985, a company named Capital Cities
Communications made a surprising $3.5 billion acquisition
of ABC, a stunning media buy as ABC was then some four
times bigger than Capital Cities.
 Warren Buffett and Berkshire Hathaway, it turned out,
helped finance the deal. In return, Buffett and Berkshire
got a 25 percent stake in the new Cap Cities/ABC
colossus, then one of the biggest media concerns on the
scene

12.  In 1995, by the time Warren Buffett and Michael Eisner
and others were convening at the Sun Valley media
fest, Warren Buffett owned 13 percent of Capital
Cities/ABC.
 “…Here we were, standing together in a parking
lot in the middle of Idaho, talking about a $20
billion transaction.”
- Michael Eisner, Disney CEO
 Although at first, Eisner and Disney were still
nominally in the running to acquire CBS — and
Eisner used that as a point of leverage in his talks
with Murphy — CBS would be bought by
Westinghouse. Disney then made the deal with
Cap Cities/ABC — at $19 billion; then the second
largest acquisition in corporate history

13.  Berkshire’s 20 million shares of Cap Cites fetched a
pre-tax return in the neighborhood of $2.1
billion. Buffett took his payment in all Disney stock
rather than cash, showing his and Berkshire’s
confidence in Disney.

14.  Buffet: “We wanted the business to be one
 That we understand
 With favourable long-term prospects
 Operated by honest and competent people
 Available at a very attractive price”
 “We try to buy into business with favourable long term
economics. Our goal is to find an outstanding business at a
sensible price , not a mediocre business at a bargain price.”
 “In our opinion , the two are joined at the hip: Growth is
always a companion of value.”

15.  Sticks with stocks in your “circle of
competence”.
 Thinks of investment success as being know
how much you know but how realistically
you define what you don’t know.
 Will improve your ability to ascertain
whether the business has favourable long
term prospects.

16.  Focus on companies with a clear , sustainable
comparative advantage, or “moat”. A moat will
help protect the company against competitors.
 Look for high return on equity , a consistently strong
free cash flow , and limited debt.
 Act as if you “own a life time decision card with
only 20 punches on it”. Each time you invest you
have one few investment available for next time.
This will help you look only for best opportunities.

17.  Look for manager who treat the shareholders’
capital with owner-like care and thoughtfulness.
 When Buffet buys a business he buys the
management as well. Buffet does not get involved
in day-to-day activities nor helps with major
strategic decisions.
 Buffet asks “Is management rational, Is
management candid and does management
resist institutional imperative?”

18.  Look at raw data, not analyst summaries. Focus on
understanding the picture , not precise points. “It is
better to be approximately right than precisely
wrong.”
 Understand that majority of stocks are not
compelling so ignore them. But when you find
stock you like, show conviction and buy a ton of it!
 Don’t worry about macro trends. Focus on long
term business value- ‘The size of the coupons down
the road.’

19.  How has the company performed?
 How much debt does the company have?
 How are profit margins?
 How unique are the products sold by the
company?
 How much of a discount are shares trading
at?

21. • Warren Buffet was known
for his generous acts of
philanthropy.
• The greatest of it all being
the donation to the Gates
Foundation