Mar 23rd, 2007 by Martin Lee
In 1995, Berkshire had an increase in networth of 45%. Despite this, Warren Buffett does not think of it as anything amazing as it is a year in which any fool would have made a great deal in the stock market. As he paraphrases President Kennedy, “a rising tide lifts all yachts“.
There were also three good acquisitions: Helzberg’s Diamond Shops, R.C. Willey Home Furnishings and GEICO. These will be discussed later on. Warren Buffett and Charlie Munger likes to make acquisiton of two types:
1) A negotiated transaction that allows them to buy 100% of a company at a fair price.
2) A modest percentage purchase of an outstanding business from the stock market at a pro-rata price well below what it would take to buy 100%.
The employment of these two strategies gives them an advantage over other people who only stick to one strategy.
In addition, they have two factors operating in their favour:
1) Outstanding managers with strong attachment to Berkshire.
2) Their own considerable experience in allocating capital rationally and objectively.
The main disadvantage that they face is their big size. Instead of coming up with just good ideas, now they need to come up with good ideas that are big.