RJR Nabisco

Summary

A major American conglomerate primarily known for tobacco and food products. Berkshire invested heavily in RJR Nabisco's below-investment-grade (junk) bonds during the late 1980s and early 1990s.

Timeline & Role

1989-1990: Berkshire purchases $440 million worth of RJR Nabisco below-investment-grade bonds. Despite Buffett's harsh criticism of the junk bond market's excesses and the "dagger on the steering wheel" leverage philosophy, he found RJR Nabisco's credit to be better than generally perceived, yielding returns that compensated for the risk. 1990 Letter

📚 Historical Mentions & Citations (1)

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1990 LetterExcerpt Available

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Our other major portfolio change last year was large additions to our holdings of RJR Nabisco bonds, securities that we first bought in late 1989. At yearend 1990 we had $440 million invested in these securities, an amount that approximated market value. (As I write this, however, their market value has risen by more than $150 million.) In the case of RJR Nabisco, we feel the Company’s credit is considerably better than was generally perceived for a while and that the yield we receive, as well as the potential for capital gain, more than compensates for the risk we incur (though that is far from nil). RJR has made asset sales at favorable prices, has added major amounts of equity, and in general is being run well.

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