Hochschild, Kohn & Co

Hochschild, Kohn & Co. (HK) was a privately owned Baltimore department store and the partnership's first entire business acquisition via negotiation.

📝 The Acquisition (1966)

Scenario: In the first half of 1966, the partnership and two 10% partners purchased 100% of the stock.
Evaluation: Buffett assessed both quantitative (assets/price) and qualitative (management/position) factors. He noted that even if the price were cheaper, he wouldn't have bought it if the management group weren't "topnotch."
Operation: Buffett planned to keep the existing personnel, noting their excellence. He emphasized a hands-off approach to operations.

💰 Role in the Portfolio

Despite the public nature of the deal, Buffett noted that HK represented only about 10% of BPL assets (approx. $50 million was invested in marketable securities at the time). He used HK as an example of his "iceberg approach" to disclosure, where large positions often remain hidden from public view.

🔗 Connections

Source: 1966 Letter
Category: Control Situations

📚 Historical Mentions & Citations (1)

Click a reference document below to expand and read the exact paragraph(s) containing this concept in the archive.

📜

1966 LetterExcerpt Available

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Most investors would climb a rung intellectually if they clearly delineated between the above two interpretations of conservatism. The first might be better labeled "conventionalism" - what it really says is that “when others are making money in the general run of securities, so will we and to about the same degree; when they are losing money, we'll do it at about the same rate." This is not to be equated with "when others are making it, we'll make as much and when they are losing it, we will lose less.” Very few investment programs accomplish the latter - we certainly don't promise it but we do intend to keep trying. (I have always felt our objectives should be somewhat loftier than those Herman Hickman articulated during the desperate years when Yale was losing eight games a season. Said Herman, "I see my job as one of keeping the alumni sullen but not mutinous.”) Hochschild, Kohn & Co. During the first half we, and two 10% partners, purchased all of the stock of Hochschild, Kohn & Co., a privately owned Baltimore department store. This is the first time in the history of the Partnership that an entire business has been purchased by negotiation, although we have, from time to time, negotiated purchase of specific important blocks of marketable securities. However, no new principles are involved. The quantitative and qualitative aspects of the business are evaluated and weighed against price, both on an absolute basis and relative to other investment opportunities. HK (learn to call it that - I didn't find out how to pronounce it until the deal was concluded) stacks up fine in all respects.

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