Do you know about Warren Buffett's dream investment? It's a small candy company

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Do you know about Warren Buffett's dream investment? It's a small candy company

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 Do you know about Warren Buffett's dream investment? It's a small candy company
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Highlights

  • Warren Buffet’s knack for finding out the best investment ventures has earned him the reputation of an investing genius.
  • See’s Candies is one of Warren Buffet’s favourite companies and his association with the company dates to the 1970s.
  • Warren Buffet looked at See’s Candies beyond just its balance sheet and paper records.

If you are wondering what one of the world’s richest people has on his mind, then it is probably something you may have never expected. Warren Buffet’s knack for finding out the best investment ventures remains unmatched, even as the world of investing rises in a steadfast manner. His prowess in the trading arena has landed him the title of the “Oracle of Omaha”, making him a force to reckon with in a world of booming financial literacy.

As is the case with many people belonging to his league, Warren Buffet’s unique investing style stems from years of experience. After gaining knowledge over many years, Warren Buffet has stuck to his longstanding beliefs. One company that he has believed in for many years is a small candy company, with which he has maintained a long-term association.

Staying true to his strategy of “value investing”, the CEO of Berkshire Hathaway picked a small company with a huge potential to grow. Based on some key parameters, Warren Buffet instilled his faith in See’s Candies and bought it about half a century back. Here is a look at what makes it the golden investor’s preferred company even after so many years.

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Story behind See’s Candies

See’s Candies was started in 1921 by Mary See and her son Charles as a small shop selling chocolates with the highest quality ingredients. However, the company soon caught the attention of Warren Buffet, ultimately prompting him to buy it out in 1972 for AU$25 million. At that time, the company had quickly grown into a profitable business, making AU$30 million in sales. The company was also looking for a buyer amidst this growth phase.

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Warrant Buffet stepped in the eleventh hour and turned See’s Candies into a holding company for his growing investments. By that time, he had also become a recurring name in the world of investing, with many looking up to his investment style. He became the chairman and CEO of Berkshire Hathaway in 1970 and turned it into a holding company as well.

Charles Munger, Buffet’s partner in Berkshire Hathaway, convinced him that it is worthwhile to spend an extra sum of money on a company, given that it has a promising future ahead. After his partnership with Charles, Warren Buffet’s mentality shifted, and he started searching for great businesses instead of investing in great bargains. His forward-looking approach helped him to become an owner of some of the best-performing companies on the stock exchange.

See’s Candies gained Buffet’s attention through a tip-off from a Berkshire Hathaway owned company called Blue Chip Stamps. This developed into a longstanding relationship between the investor and the candy company, which is evident to this day as Mr Buffet often mentions See’s Candies in his interviews.

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Why Buffett chose See’s Candies?

Interestingly, the company did not have a startling balance sheet or exceptional revenues that could land it in any investor’s dream list. Apart from sales worth AU$30 million, See’s Candies had approximately AU$2 million in post-tax earnings and AU$8 million in assets. However, there were some critical factors that helped Mr Buffet make this exceptional decision of believing in an otherwise overlooked company.

Buffet found value in the company’s customer base.

Firstly, he noted that the company only used high-quality ingredients and did not compromise on the product. Even if the company was catering to customers on a scale, it was a hit among customers due to the superior quality of the products. Secondly, this good quality production earned the company a loyal customer base that kept coming back for more. In a nutshell, See’s Candies focused on building quality over quantity.

One can say that the company derived its value from its inherent policy of developing a superior quality product. The company’s beliefs resonated with the customers’ demands, giving it a brand value that was higher than its worth on paper. Today, the company has evolved into a premium supplier of chocolates and candies with its customer base still intact, much like Buffet’s investment style.

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