In recent months and even years, the investing public has paid close attention to the legal exposures facing Bayer and Johnson & Johnson. Bayer acquired Monsanto, which manufactured Roundup, and American juries across the country are determining that Roundup causes injury. Similarly, Johnson & Johnson’s talcum baby powder has been increasingly determined to contain asbestos, and therefore, a causal link to the most asbestos cancer, mesothelioma.
With far less fanfare, Colgate-Palmolive has also found itself involved in talcum powder litigation because it sold Cashmere Bouquet (talcum) powder from 1871 until 1985. It is now involved in similar litigation to Johnson & Johnson, with the company disclosing the following on page 18 of the 2018 Colgate-Palmolive annual report:
“The Company has been named as a defendant in civil actions alleging that certain talcum powder products that were sold prior to 1996 were contaminated with asbestos. Most of these actions involve
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Out of all the acquisitions that Buffett and Munger made together, the acquisition of See’s Candies in January of 1972 might be the most important, not necessarily because it was the greatest source of future wealth for the two of them, but because of the way it shaded their approach to investing.
In the late 1960s and early 1970s, Warren Buffett focused his investing on windmills, textile mills, dying department stores, and pump factories. These were dying businesses, but they followed the Graham school of thought that you can buy something so cheap before book value that you would be guaranteed a profit if you chose to liquidate the business and you’d have a good chance of doing extraordinary well even if the business showed modest improvement. If Bart had to go to the chalkboard and describe Warren Buffett’s investing style before the See’s Candies purchase, he would write, “Buy … Read the rest of this article!
Since at least 1993, but possibly earlier, Warren Buffett has only collected $100,000 annually to serve as CEO of Berkshire Hathaway. There are good reasons for this, as it bolsters his social and political capital (i.e. he has more perceived moral authority to lecture corporate America on restraining their animal impulses when he’s collecting $100k rather than $100m annually as compensation). There are also economic reasons for this arrangement, as Buffett has owned between 17% and 36% of Berkshire Hathaway stock during this time, and there would be a certain inefficiency in paying himself from an asset where he owns a sizable stake (of course, he would still be more absolutely richer if he had taken such compensation).
Even though there are important reasons why Buffett behaved the way he has regarding his personal compensation, it also remains true that he could have fairly demanded annual compensation of $100 million … Read the rest of this article!
Roger Lowenstein, in his preface commentary found prior to Chapter 1 of Security Analysis, wrote:
“In the 1930s, there was a common notion that bonds were safe— suitable for ‘investment’—while stocks were unsafe. Graham and Dodd rejected this mechanical rule, as they did, more generally, the notion of relying on the form of any security. They recognized that the various issues in the corporate food chain (senior bonds, junior debt, preferred stock, and common) were not so much dissimilar but rather part of a continuum. And though a bondholder, it is true, has an economic, and also a legal, priority over a stockholder, it is not the contractual obligation that provides safety to the bondholder, the authors pointed out, but ‘the ability of the debtor corporation to meet its obligations.’ And it follows that (leaving aside the tax shield provided from interest expense) the bondholder’s claim cannot be worth more
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“Think how association, pure association, works. Take the Coca-Cola Company (we’re the biggest shareholder). They want to be associated with every wonderful image: heroics in the Olympics, wonderful music, you name it. They don’t want to be associated with the funerals of presidents and so forth.” –Charlie Munger
If I were running advertising campaigns for Google, I wouldn’t want my brand name associated with the image of dying dogs, even within the context of admirably visiting an ailing pet. The point of the commercial is to showcase the new features and functionalities of the Nexus 7—when the guy in the commercial learns that the flights to his home are full, he is able to verbally ask for directions home and learn of an Express Train route he can take.
This advertising campaign could have easily accomplished the same net effect (making us, the TV viewers, aware of the Nexus … Read the rest of this article!