Office Depot has had an ugly business model for the past two decades. The company has only had one seven year stretch in its corporate existence (2000-2006) in which profits grew. Other than that, the company see-sawed along a trajectory of “two steps forward, three steps back, two steps forward” for most of its existence. Even Home Depot’s glory days, however, had more to do with financial engineering (borrowing debt to reduce the stock count through buybacks) rather than actually growing a healthy business.
Specifically, throughout the 2000 to 2006 period, profits had only grown from just under $300 million to $396 million, but the office supply company leveraged the balance sheet to reduce the share count from (a high of) 312 million to 272 million within that time frame. Since then, Office Depot’s numbers have been disappointing in a way that should have made the company off limits to … Read the rest of this article!
During the late 1980s and early 1990s, Warren Buffett built Berkshire Hathaway’s famous 400,000,000 share position in the largest beverage provider in the entire world, Coca-Cola (KO). At the time, he spent a little more than $1 billion of Berkshire Hathaway’s funds to make the initial investment, which has the same purchasing power as $1.8 billion today.
During this 30+ year time horizon, Berkshire Hathaway shareholders have seen the value of the $1 billion holding increase in value to $21.8 billion, but more subtly, they have collected $3.1 billion in total dividends during this time. In some respects, the dividend figures are understated in multiple ways.
First, they are understated to the extent that, say, collecting $30 million in cold, hard cash deposits in 1990 meant far more in terms of purchasing power than they do today, but they are also understated to the account that no opportunity cost is … Read the rest of this article!