In 1963, Warren Buffett bought a block of American Express stock after the “Salad Oil Scandal” sent the shares down substantially—in a nutshell, one of American Express’s subsidiaries had used millions of dollars worth of salad oil as collateral to secure financing, and it turned out that the salad oil did not exist at all, putting American Express on the hook. Warren saw this as a buying opportunity, and paid the equivalent of $0.94 per share for the stock. It quickly went up to the equivalent of the $5 range within five years, and Buffett sold.
However, since 1968, American Express has increased another seventeen-fold. If Buffett hold on to his shares, he would have compounded his wealth at 13.1% annually since then (of course, we can’t fault Buffett for selling since he has compounded Berkshire’s book value at north of 19%, making him one of the only people walking … Read the rest of this article!