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ENTITY
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R. J. Reynolds Industries, Inc.

R. J. Reynolds Industries, Inc. (RJR) was a massive American tobacco and consumer goods conglomerate that became a significant "non-controlled" holding for Berkshire Hathaway in the early 1980s.

📝 Investment Context

In the 1981 Letter, Buffett named RJR as one of the four key investments (alongside GEICO, General Foods, and The Washington Post) whose undistributed earnings significantly impacted Berkshire's true economic value.

🏗️ Role in Berkshire's Strategy

  • Inflation Hedge: Tobacco products often possessed the ability to increase prices easily, fitting Buffett's "Category 1" business criteria for an inflationary environment.
  • Ownership Earnings: Buffett used RJR to highlight the discrepancy between GAAP-reported earnings and the "true" earnings power of Berkshire's portfolio.
  • Market Valuation: Buffett noted that RJR's earnings were being retained and put to good use, but market valuation for these earnings was often uneven.

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