Activist Investing, Ben Graham, Business Articles, History of Finance, Investing, Investment Philosophy, Learn About Investing, Securities, Value Investing, Warren Buffett

Berkshire Hathaway Acquires Warren Buffett

It was May 6th, 1964 New Bedford, Massachusetts Warren Buffett’s (Buffett Partnership LTD) owns Seven Percent (7%) of Berkshire Hathaway’s outstanding shares totaling One Million Five Hundred Eighty Three Thousand and Six Hundred and Eighty (1,583,680),a failing textile company was busy seeking outstanding shares from it’s shareholders and while conducting the share negotiations Berkshire’s Management Seabury Stanton made a miscalculation of slighting a young partnership investment manger named Warren Buffett.

What happens next will change the fate of it’s CEO and secure the legendary investors future.

It was a normal day in may 1964 Warren Buffett was a Humble Midwesterner who wore his good faith on his sleeves. Began noticing the markets downward pressure on a little declining Textile Company named Berkshire Hathaway. After some research Buffett briefly meets the CEO at a gathering. The company was closing factories and repurchasing shares on the open market from shareholders as a way to slow it’s Market downward pressure on the Stock Market.

Then CEO Seaborn Stanton of Berkshire Hathaways was a Harvard graduate who’s personality included a passive aggressive smugness when peacocking around. Stanton mailed a share buyback letter to the Buffett Partnership Warren Buffett the Managing Partner of Buffett Partnership Limited has the fortune of selling his stake in Berkshire at a quick profit. Based on the fact Buffett received a letter by Seabury Stanton who manages Berkshire Hathaway was asking Shareholders to SELL back 225,000 class A shares to Berkshire Hathaway Stock at a price point of $11.375 per share. Buffett shares; “Buffett admits he expected the letter from Berkshire’s Stanton and was surprised at the price Seabury Stanton was offering.”

“A SLIGHTED OFFER WARREN BUFFETT COULD NEVER IGNORE”

At the time Warren Buffett had all of his net worth inside Buffett Partnership Limited. And one day during the offering period in 1964 Stanton and Mr. Buffett and had a brief conversation with Buffett asking what price point would Buffett Partnership Limited be willing to sell it’s shares? “Buffett answers $11.50!” Stanton responded, “Fine we have a deal.” So a few days later after the Acceptance by Stanton? Berkshire did a disservice to Stanton and sent a letter to Buffett Partnership Limited offering an Eighth of a Point lower. We don’t know the actual words. However we can assume this slight was anything but honorable. It would cost Seabury Stanton his Company later.

Crediting Business Insider: “Warren Buffett’s entire legacy would’ve been quite different if he had swallowed that eighth of a point ($0.125) discount and just sold. The $11.275 Stanton was offering was a massive 50% return relative to the $7.50 he paid just two years before in December 1962.

Buffett describes how the New England textile industry was spiraling. Which was His initial rationale for buying shares, however, was that it was selling at a steep discount to its working capital per share and book value per share.”

What does a $0.125 drop in offer Mean?

So let’s get this straight? Stanton wanted to lowball Buffett Partnership Limited’s offer of the initial $11.50 per share down to $11.275 per share. This alone equals a Eighth of a Point. And if we consider the initial Price Buffett paid two years previously of $7.50 per share for Berkshires Shares. Equals a 50% margin at $11.275 per share. So the fact Stanton slighted Buffett on ($0.125) would set in motion a event in the future from this shaved Offer that has made The Oracle of Omaha the Legend he is!

Buffett Partnership Limited Responds

In light of the clear lowball that was sent in the form of a passive aggressive counter offer letter offering $11.275 from Seabury Stanton to BPL after the initial offer of $11.50 agreement to buy back shares. I think it would be understandable this lowball letter had a irritating affect on Mr. Buffett. It was understandable Mr. Buffett did not accept this situation. And felt the need to establish ownership of the situation. So he planned his next moves carefully in secret.

Buy up undervalued or falling value Class A Shares Quietly

Mr. Buffett amazingly began to buy shares quietly instead of selling his partnerships exposure. Warren began quietly buying the declining shares of Berkshire Hathaway’s equities in the market as the company began to drift downwards in price. Buying the Shares at a Discount is a savvy move by Partnerships wanting to buy their way onto Boards of Directors.

This classic action will force change through an Activist Investor Action. The act of buying large blocks of shares quietly and buying undervalued shares will allow a investor or Investment Group to acquire a seat at the Board of Directors Meeting and table. The question is? Exactly what was Mr. Buffett aiming for when he began buying shares of Berkshires Hathaways outstanding shares?

Mr. Buffett’s plan was to gain control of Berkshires Hathaway Board of Directors Seat. For the purpose of exacting change to the Executive management from the Board of Directors level. This was secretly Warren’s Goal.

Everyone was telling Mr. Buffett Buying Berkshire Hathaway would be a Mistake!

Even though quietly people were telling Warren Buffett that buying control of Berkshire Hathaway would be a mistake. The mentee of legendary Columbia Professor Ben Graham did exactly the contrarian option. And opted to begin buying a controlling stake in the failing Berkshire Hathaway Company. Warren Buffett officially took control of Berkshire Hathaway on May 10, 1965. And on the Day the news broke that Warren Buffett had obtained control of Berkshire Hathaway, the President of Berkshire Hathaway, Seaford Stanton who had recently slighted the up and coming maverick Investment Partner Warren Buffett, quietly tendered his resignation immediately following the news.

This is one of many legendary Investments that would cement Warren Buffett as a Man the many Public Company Chairmen should never trifle with again!

Dear Mr. Chairman By Jeff Gramm

Are you interested in Boardroom Battles and Challenges?

Please read Dear Mr. Chairman by Jeff Gramm. There is a time and place for Activist Investment Stories. This book is a good start. It’s also interesting to read about David Ellison’s recent action to obtain positioning for Skydance Paramounts acquisition offer for Warner Brothers HERE.

What happened after Warren Buffett took control of Berkshire Hathaway?

After taking control of the Board of Directors at 15 dollars per share? Mr. Buffett pivoted the business into insurance, creating a vast conglomerate. Under his leadership, the company achieved a historic compounding shareholder return, famously transforming into a trillion-dollar enterprise. Ultimately retiring stepping aside and appointing Greg Abel a long standing lieutenant assume the helm of CEO in 2026.

Corporate Governance You Be the Judge?

According to Google’s Gemini, the definition of Corporate governance is the system of rules, practices, and processes used to direct and control a company. It establishes a structure for balancing the interests of a company’s stakeholders—such as shareholders, management, employees, customers, and the community. So with this shared, the Corporate governance equation inside many Boards of Directors is a subject that deserves it’s own Political spectrum. Given the breadth and depth of this topic it’s to deep as a topic for todays post. However I do believe we all can agree when someone makes a commitment and fails to satisfy the Board of Directors Mission, Obligations and Marching orders? That it’s time to reconsider your effectiveness for the organizations benefit. Outside Removal by the Boards vote is always a threat to a Board members incumbency.

I do hope you enjoyed todays post as this post details some key facts about Mr. Warren Buffett’s beginnings inside Investing using a Partnership Structure and his mission to obtain a controlling interest in a Public Company that eventually became Mr. Buffetts Holding Company. However if you have read and followed and researched the history of Berkshire Hathaway like Christopher Bloomstran has and has become an expert on Berkshire? It’s highly likely we mutually agree the facts do align that Mr. Warren Buffett and his team at Berkshire Hathaway has touched nearly all of our lives in a positive way through his long horizon investing. Including Warren’s ambitious and righteous humbling mission of evicting Seabury Stanton from Berkshire’s Board of Directors during 1965.

Asset Management, Business Articles, Investing, Investment Management, Learn About Investing, Money Manager, Value Investing

7 Lesson’s You Can Use From Investor Guy Spier

What comes to our minds when I mention the name Guy Spier?

Guy Spier is a Value Investor, Fund Manager, Investment Banker, Harvard Graduate, Talented Skier, Father, Husband and also Mr. Spier is a Community leader of VALUE X.

Here are Seven lessons I have learned from Guy Spier that I would like to pass on to you. It doesn’t matter if your a Professional Investment Fund manager or Company Executive. You will find calmness and wisdom from Guy’s wisdom.

Investing Without Emotions

Guy teach’s his followers like myself that we should always invest without emotions. First we must break down what this means. 1. Breaking down what are our personal Behavior Biases truly are? 2. Be aware of common behavioral biases we may resort to without thought. 3. Defining your goals and time horizon can help you avoid emotional biases. 4. Bucketing or Achieving Milestone’s helps your clearly see your progression. Discipline can help you keep to a plan of action.

You may feel that watching CNBC or Bloomberg as a Retail Investor is good to gather the latest information on the market. It will feel like this gives you an investing edge in the market. However your are dead wrong! It’s simply a media outlet meant to deliver news and entertainment in the business world. That’s all. It’s smart not to allow this Television content to cloud your judgment and emotions while Investing. We as Value investor’s have a checklist, and a sophisticated skill set that includes Due Diligence and valuation processes before Investing in a Opportunity. We use these skills and our personal research before deciding if this would a good investment opportunity. Having the discipline to say no to things or investments does have tremendous value. Survival is everything. Protecting Capital is your duty. These are all ways to help you as a individual keep thing in focus and Invest without Emotions.

Resist Rebalancing

Many Retail Investors are being taught by the Traders on Youtube and it’s also standard practice for many Financial Advisors to Rebalance your Portfolio of securities when it looks like the market is overvalued. This looks like this. Your standard Retail investor has twenty securities positions. And if you place Five Percent of your Capital in to twenty positions this equals a hundred percent of your capital. However if history is a teacher? And if you were to just allow your portfolio grow organically? You may have a few positions see substantial growth and you will see a mixed bag of performance of mediocrity. And then you will see a few positions perform poorly earning you no returns or possibly loosing money. However with Guy’s approach of just allowing your portfolio to grow organically without rebalancing? You will see your small set of high performers account for most of your growth in your portfolio. While at the same time limiting the loss’s of the poor performers. In other words? Investing is very forgiving if you adhere to using long term time horizons as a strategy for your portfolio.

Learning From Your Mistakes Early in Your Career

This is truly a important lesson that Mr. Spier has shared publicly that I feel has a ton of merit for other Investors and Entrepreneurs like myself. Bottom line up front? You will make mistakes. You will make many mistakes. You will embarrass yourself. Making Mistakes and learning from them is just apart of the Human Experience. And if your a Entrepreneur? You will likely find that your failing your way forward. Now let’s learn about a big Mistake most Investors encounter when they begin investing as Retail Investors. You just don’t know what you don’t know. There are three different types of Entrepreneurs. Small Business Boutique Entrepreneurs, Enterprise Operator Entrepreneurs, and the Decentralized Investment Entrepreneurs. All has their own unique world. However they all encounter one mistake after another. It’s truly important to share your mistakes so that others may learn from your mistakes in business. Let’s be honest! Sometimes they make for great stories when your successful in the end. LOL

Defining Your Circle of Competence

Defining your circle of Competence means “What are you trained to do and what are you professionally knowledgeable about?” This important question can give you direction and confidence when evaluating Investment Opportunities. And if we are being honest if you can fix your Car’s Engine when it fails on you. I wouldn’t expect to see Guy Spier turning wrench’s in his Driveway in Switzerland when his car suddenly has a failure. No He would dispatch a Automotive technician or just buy a new car. Why spend the time on something of this caliber when you have options. Expert Networks operate in the same manner. There are Business professionals who do not have backgrounds in all things related to technology, manufacturing and and so many more topics of interest.

GLG Insights is a company any Investor or Business Professional can access and speak to Experts in their respective fields about a topic and answer difficult questions you may have about their respective professions and expertise. If you don’t have a Background in Softdrink manufacturing it’s likely you would seek out Softdrink Manufacturing experts. This is what we mean by saying, “Define your circle of competence.” You know what you know. And leave the hard questions to the experts of their fields.

Risk and Downside

Investing is a activity that involves Risk. Risk is the thing that acts as barrier or is the Downside of Investments. Some investments are relatively safe like Investing in US Treasuries. Then their are Investments like for example investing in to High Risk opportunities that may not return your capital and may not give you a return like New Startups and Junk Bonds. It all comes down to What is your Risk threshold. The lesson we can take from Guy’s lesson’s on Risk directly is communicated by his friend Warren Buffett. Warren spends a lot of time thinking about the Downside of an Investment. If you are comfortable investing your money into a company with a proven track record? Then it’s highly likely the downside of risk will be lower than investing into a unproven company that has not been in business for long. Your appetite for Risk is a personal comfort level. And I must mention that your comfort with risk directly correlates with what your circle of competence is!

Interestingly Mr. Guy Spier’s father was a Sapper in the Israeli Army. And the reverence and love that he speaks about his Father and how his Father is able to calm the environment with his presence and ability to listen while bringing calmness to the situation. Sounds to me like the Man you want next to you in a Fox Hole while your being bombarded with Bombs and all out War. This touches on the Topic of Risk and Downside because you want to be able to keep your cool during stressful situations. Id love to learn more about Mr. Spier’s Father. He sounds like a real Bad Ass. I can respect that.

Did you catch my latest Article on Bill Ackman’s Investing Principles Here.

Courageous Integrity

While watching or rather Listening to Guy Spier and his fellow writer Mr. William Green it was very refreshing to hear these two community leaders speak about having the Courage to share your thoughts and feelings in real time. While filming a episode of the Podcast Surviving and Thriving recently. They were sharing a point in time when they were collaborating and writing Guy’s first Hit Book “The Education of a Value Investor”. I found it utterly Courageous that Mr. William Green had the fortitude to hone in and selectively ask hard questions and seek difficult answers to personal situations that occurred to Mr. Spier during the very stressful weekend of the Great Financial Crisis of 2008. The Video is below. Furthermore during the weekend of the Great Financial Crisis Guy’s Aquamarine Fund was hanging in the balance and held hostage during the Bankruptcy of Bear Stearns. However Jamie Dimon and JP Morgan came to his Funds rescue by making a Bid and buying Bear Stearns. It’s truly a fascinating look at how two very good friends of 30 years can open eachother up and allow mutual trust. A lesson definitely worth the watch.

Keep a Professional Journal | Annual Reports

William Green and Mr. Guy Spier touch on the very important topic of keeping and committing to writing a Professional Personal Journal or even servicing your Funds Annual Reports. Some in our space of Investing, do diligently keep Annual Reports detailing their Thoughts, Decisions, and the reasoning behind the exposures in the Market within their Portfolio’s. How many times have we as individuals forgotten why we did this or that or forgotten our split of the moment thoughts and reasoning while explaining our actions to others who were not present? Keeping track of professional actions is vital to our success as Professionals. So understandably It makes since to keep a journal. However it’s also important to keep a Personal Journal to allow the reader or you back into your Decision making process. We are all humans. We are all imperfect. So keeping a Personal and Professional Journal can make a ton of sense for Professionals like myself and Guy who do openly and admittedly have ADHD.

Mr. William Green’s advocacy of writing throughout your career stems from his professional life as a Author and writer. He is always selflessly adding value in the Investment Space. Mr. Green is a professional writer within the Value Investor community. And his speech’s and guidance and journal suggestions are always pure gold. I genuinely appreciate Mr. Green sharing thoughts publicly as it has helped me in my writing.

Annual Reports

Why keep a Journal for a Annual Report? As Professional Investment Advisors and Investment Fund Managers or Partnerships it’s not only smart to keep a Annual Report, but also it’s required by Securities Regulators. When Investors read your Annual Reports it’s wise to let them in to see how your decisions and actions led to you choosing to build a Professional Portfolio.

After all the Investment Returns or Failures need to be accounted for. An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. At the end of the year when Annual Reports are drafted and published this keeps all involved in the Profession Accountable and demonstrates Public Transparency. I hope you found something in this post useful and insightful from Mr. Spier’s content.

Godspeed
JS

Business Articles, Investing, Investment Philosophy, Learn About Investing

Qualitative Growth Investment Philosophy

This post will share and demonstrate what is written and communicated inside of Phil Fischer Book which is the origin of Qualitative Growth. A investors greatest concern should be managing Risk. If you manage to understand your business and all it’s unique qualities while considering Risk? It’s likely you have stumbled upon the foundation of Qualitative an Growth Investing Principles.

Asking detailed hard questions. Example: When we buy or invest in any company or security? It is only natural to ask detailed educated pointed questions and do some due diligence before we make that investment. And if we add in the fact we are not seeking dividends? That is basically the foundation of Phillip Fisher’s Investment Philosophy Growth Investing. Let’s get into some examples of questions and details.

Charlie Munger may he rest in Peace long ago when Berkshire was growing. Convinced Warren Buffett to begin considering and partially adopting the Phil Fisher philosophy of investing to implement into the Berkshire’s strategy. If I remember correctly this video should help. Warren Buffett starts by sharing Phil Fisher’s Book is one of the best Books on Investing.

Who is Investor Phillip Fisher

Philip Arthur Fisher was an American stock investor best known as the author of Common Stocks and Uncommon Profits, a guide to investing that has remained in print ever since it was first published in 1958. Mr. Fischer basically began using his insights as a Investment Philosophy. Example, assume If a stock is going to outperform the market longterm? In this case it does not matter what the current price is! Becuase the performance over time will outpace the price volatility and increase if you have done your due diligence and leg work correctly.

Mr. Fisher focused on Qualitative Fact finding and positive assumptions backed by verifying tangible information. The fact he did such heavy investigating is that his findings may lead to a Stocks growth and having the right information for his investment fundamentals over the longterm.

Put another way? Qualitative investing requires assumptions about the future that are made on the basis of quality. An analyst will make judgements on the prospects of the stock based on the qualitative attributes of the company.

Mr. Phil Fisher career began in 1928 when he dropped out of the newly created Stanford Graduate School of Business (later he would return to be one of only three people ever to teach the investment course) to work as a securities analyst with the Anglo-London Bank in San Francisco.

Growth & Qualitative Investing

Mr. Fisher wrote in his book detailing a basic checklist that helps investors sift and sort through Stocks and Investment Opportunities using Qualitative and a checklist of sophisticated questions that arrive at a “YES,NO or Maybe” conclusion. This strategy of investing gave birth to Growth and Qualitative Investing.

Asking Questions that helped Mr. Fisher?

Does the company have excellent management teams?
How is the Business’s Qualitative Fundamentals on the Balance Sheet rather than using ratios?
Stock Price is not evaluated. So if a Stock is Expensive currently Fischer’s reasoning looks towards the long term growth of the business which will outperform short term stock pricing models.
If a investment fails any of the questions on the Checklist after investing? Mr. Fischer makes it a point to move on selling the investment.
Understanding the Business and what makes the business work? Valuable question.
R&D Spending? If target company is outspending and outperforming competitors? This is a good indicator or qualitative fundamentals at work within the business.
What makes the Business grow? Very important to understand.
Does the Business have repear customers?
Business profit margins must be healthy.
Does the Executive Management have outstanding community relations?
Is the cost analysis and quality controls of the business products and services accounted for? Will this share information about operations?
Is the Companies Management Integrity Unquestionable?
Would you want your family to work in this business? And does the community value the Business’s presence?
Is there room for growth in the space and is the company’s management providing information about current industry forecasts?

These are all questions Mr. Fisher has shared in his Book written in 1958, which have withstood the test of time. And yes many of these questions have evolved with time into my own use. And in all fairness most of these assumptions or questions still very much apply and are used today by Institutional Investors and Professional Investors who manage Fund’s. You may recognize some of the fellow Buffet followers who use these methods of Investigating Investments. Professional Investors and Fund managers like Guy Spier, Christopher Tsai, Li Liu, Chuck Akre, Seth Klarman, Peter Lych, Bill Ackman and many more.

Conclusion

In Conclusion for today’s post on learning more about Growth or Qualitative Investing Philosophy, we must look at what works in the markets as legitimate Investment Philosophy and what doesn’t work. If you consider most individuals investment experience and ability to mitigate and consider investment RISK. Most retail investors who day trade do not have Advisors. This ends up making them lose money and treat the Stock and Credit Markets like a Casino. Their goal is always the same. They are hoping and praying that twenty dollar stock they just bought with their life savings will rise in the next week or few days. But this is absolutely not how the Professionals invest. Nothing about investing can be done from feelings or judging ones own intuition! It takes serious investigation and professional trained discipline.

Individuals who don’t use any Investment Philosophy will likely be humbled by the sudden unemotional Market Volatility. Magellan Fund Manager Peter Lynch loved volatility for this exact reason. He used volatility to invest as a Value Investor during times were Fearful. So in all fairness? I think it’s safe to say after reading the Book by Mr. Phil Fisher the more sophisticated detailed and creative questions we ask about a Investment opportunity? The better off we will likely be years down the road. Thanks for reading everyone Please do read Mr. Phil Fisher’s book. Uncommon Stocks and Uncommon Profits.

I appreciate you reading my Post. It was a blast preparing this for you. And to my fellow Professionals who do run Investment Funds and use Mr. Fisher’s Investment Philosophy? Please do drop me a line to correct anything I may have written or shown in this post that is incorrect. I am doing my best with what I have. Thank you. JS

Investor, Financier, Writer

Kansas City, Missouri

Category Archives: Learn About Investing