How Buffett Made a Killing in Chocolate
By
Emil Lee
Although no one can claim to fully understand Berkshire Hathaway Chairman Warren Buffett's genius or how exactly he values a company,
it doesn't hurt to try to understand his past purchases. In this case,
See's Candy, an extremely simple but successful early acquisition,
provides a peek into how the master made a killing in chocolate.
Like other Berkshire investments -- including GEICO, Moody's, American Express, and inside value recommendation Coca-Cola,
-- See's Candy is a cash cow that earns stratospheric returns on
capital. From its purchase in 1972 until 1998
See's Candy increased pre-taxed earnings from $4 million to $60 million, and as Buffett said, "it still doesn't take any additional capital."
While most of Buffett's
investments are profitable, Buffett's most ingenuous picks were his
purchases of See's Candy and Gillette. Both were so seemingly ordinary
that they belied their market shares and their capacity to generate
profits that most companies only dream about.
A
video of Sees Candy CEO Brad Kinstler, explains why Sees is so
successful but also that they are having difficulty tapping into mid
western and eastern markets.
Link to the Sees Interview: see-s-candy-president-brad-kinstler-talks-to-cnbc_news
Link to Got Chocolates Video: GotChocolates - Video