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 … Read the rest of this article!
I would guess that, especially compared to most guys in their 20s, I tend to have a more favorable opinion of Wal-Mart than most of the population in general. I consider Sam Walton’s life to be one of the best “stories” in American history—a man that got ripped off by his landlord running a Benjamin Franklin Five & Dime store risked it all to start his own enterprise, to the mockery of Sears and the banks from which he sought his original capital (incidentally, Sam Walton eventually went on to own the bank that denied him a loan).
I love the fact that Wal-Mart’s growing profits over the past forty years have made … Read the rest of this article!
Regarding the identification of excellent long-term stock investments, Warren Buffett made the following observation in his 1977 shareholder letter:
“Most companies define ‘record’ earnings as a new high in earnings per share. Since businesses customarily add from year to year to their equity base, we find nothing particularly noteworthy in a management performance combining, say, a 10% increase in equity capital and a 5% increase in earnings per share. After all, even a totally dormant savings account will produce steadily rising interest earnings each year because of compounding.
Except for special cases (for example, companies with unusual debt-equity ratios or those with important assets carried at unrealistic balance sheet values), we believe a
… Read the rest of this article!
On the list of investments that I should have recognized, but ultimately failed to recognize in real time, is the success of Adobe, Inc. (ADBE) as a software as a service company. Back in 2011, when Adobe stock was at $27 per share, Adobe was the type of business where you would pay a one-time fee to acquire.
Want to access, edit, and highlight a PDF? Pay Adobe $99, and boom, you’ve got the privilege to do so for life. That was a great business model. It turned Adobe into a billion-dollar company because it didn’t cost anything additional to acquire a customer. Nothing wrong with that.
But then, Adobe took an action … Read the rest of this article!
Wendy’s is not a company that gets a whole lot of attention simply because it has played fourth fiddle to Dairy Queen, Hardee’s, Burger King, and the star of the show, McDonald’s. With McDonalds growing profits and dividends like clockwork around the globe every year, and being the one source of truly lucrative long-term wealth creation within the fast food industry, it can be easy to overlook some of the contributions to human understanding brought about by some of the secondary players.
Today, I want to shine a quick spotlight on a strategy employed by Dave Thomas, the founder of Wendy’s. From the beginning, Thomas had to work cut out for him—when he … Read the rest of this article!