Berkshire Hathaway Inc

Berkshire Hathaway Inc. became the center of the Buffett investment universe after the partnership acquired control in 1965.

📝 Origins as a Control Situation (1962-1965)

• Entry: Buffett began buying shares in November 1962 at $7.60/share.
• Acquisition: The partnership obtained majority control in the spring of 1965. The average cost was approximately $14.86/share.
• Status at Control: The company had been sliding for decades; it was down to two mills and ~2,300 employees (from a peak of 11 mills and 11,000 workers in 1948).

💰 Valuation and Strategy

• Audit Valuation: Buffett valued BPL's controlling interest at a price halfway between net current asset value and book value. This reflected 100 cents on the dollar for receivables/inventory and 50 cents on the dollar for fixed assets.
• Working Capital: On December 31, 1965, the company had net working capital of ~$19/share.
• Management: Buffett retained Ken Chace as President, noting that the remaining units had "excellent management personnel."

🎭 Metaphor: Oatmeal vs. Cream Puff

Buffett famously described Berkshire as "oatmeal"—a comfortable, solid, but unglamorous asset—contrasting it with the "cream puffs" (high-priced growth stocks) that drove the speculative markets of the mid-1960s.

🔗 Connections

• Source: 1965 Letter
• Concept: Control Situations
• Manager: Ken Chace