Page last updated at 14:41 GMT, Sunday, 25 October 2009

Warren Buffett's best investments

When Warren Buffett bought Berkshire Hathaway in the 1960s, it was a working textile mill in New England.

Warren Buffet
Hands up if you want investment success like Warren Buffett

He later closed down production when he decided it could never be a profitable business, but retained its name for his holding company.

Berkshire Hathaway is the corporate face of Warren Buffett - the firm in which he holds his investments and the businesses he has bought.

Its constituent companies and investments provide an insight into Mr Buffett's thinking.

So how has he chosen where to put his money?

BERKSHIRE HATHAWAY (1965)

Tracing its roots to a textile factory founded in 1839, by the 1950s Berkshire Hathaway had grown to fifteen plants employing 12,000 people. From 1962, Warren Buffett began to buy stocks in Berkshire Hathaway and by 1965 he had gained a majority share.

In 1985, struggling against competition from cheaper labour in overseas factories, the textile mill was closed. He is happy to admit that Berkshire Hathaway wasn't one of his best investment decisions.

But its share price tells a different story: Mr Buffett began buying shares in Berkshire Hathaway at $7.60 a share. Today, as his investment vehicle, each share is valued at around $100,000.

GEICO (1951-1996)

Mr Buffett's involvement in Geico stretches back to 1951, when his interest was sparked by his mentor, the business writer and investor, Benjamin Graham. Mr Graham was an investor in the insurance company, and the young Warren visited the company in Washington and began to buy a few shares.

Geico
Insurance firm Geico sponsors motorbike racing

Geico's success continued throughout the fifties and sixties, but by the mid-seventies the firm had run into trouble. In 1976 Mr Buffett stepped in, and through Berkshire Hathaway bought half a million shares in the company, only to see them quadruple in value in six months.

Twenty years later, the business cycle drooped again, offering Mr Buffett a chance to buy the company outright for $2.3 billion.

The investment, along with Berkshire Hathaway's other insurance companies, provides a cash float that allows Mr Buffett and his partner Charlie Munger to invest without having to borrow money.

DAIRY QUEEN (1998)

Buffett's love of ice cream and his eye for a business opportunity came together when Berkshire Hathaway bought Dairy Queen for $585 million.

With its familiar logo, glimpsed from highways and movies alike, the soft ice-cream company founded in 1940 has in excess of 5,700 outlets from Omaha to Oman.

Dairy Queen's fare now includes hamburgers and fries and soft drinks such asg Coca-Cola - a business in which Mr Buffett also has a large stake.

Since 2005, Dairy Queen has been expanding and lately announced its intention to open 500 more outlets in China over the next few years.

As Buffett put it in his annual shareholders' letter: "We have put our money where our mouth is."

COCA-COLA (1988)

Mr Buffett says he likes businesses he can understand.

Coke bottles
Coke has been a good thing for Warren Buffett

Coca-Cola's business model isn't quite as simple as you might imagine - involving separate syrup production and bottling plants - but it's not rocket science.

First produced in 1895 as a syrup, the soft drinks company's advertising and its unique bottle gave Coke global recognition.

During the 1980s, Mr Buffett believed that Coca-Cola's share price did not reflect the company's steady returns, strong brand and opportunities for growth, so he started buying its shares.

Now with an 8.6% stake in the company, Berkshire Hathaway's commitment to this once-undervalued firm has paid off - and is now worth more than $10 billion.

GOLDMAN SACHS (2008)

Warren Buffett may be best known as the Oracle of Omaha, but he became Goldman Sachs' knight in shining armour during the financial crisis which hit Wall Street last year.

On 23rd September 2008, Berkshire Hathaway invested $5 billion in the company, matching a publicly raised investment.

Within hours, Goldman's shares had risen 6%.

Mr Buffett bolstered confidence in Goldman, and, at the same time, secured a favourable deal for Berkshire, with Goldman agreeing to pay Berkshire Hathaway a 10% annual dividend on the preferred stock, irrespective of Goldman Sach's common stock price.

The World's Greatest Money Maker: Evan Davis meets Warren Buffett, broadcast 2100 Monday 26 October and 2320BST Tuesday 27 October on BBC Two.



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