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Buffet To Buy Gum?
By JD Bluefield | April 28, 2008
According to a late night article, Warren Buffett’s Berkshire-Hathaway may be close to sealing a deal to finance Mars, maker of the M&M’s and Snickers bar, to purchase Wrigley (WWY), maker of chewing-gum.
If this goes through this will create the largest confection company in the world, the Coca-cola of candy if you will. Berkshire-Hathaway already owns major stakes in Coca-cola (KO) and owns the See’s Candy company. Mar’s is a privately held company head-quartered in the US.
This is a classic Warren Buffett acquisition: 1) They are major players in its field with a dominating position; 2) They have very strong consumer driven brands:
- Mars: Milky Way, M&M’s, Twix, Skittles and Snickers; and pet foods Whiskas, Chappy and Pedigree
- Wrigley’s: Juicy Fruit, Wrigley’s Spearmint, Doublemint, Big Red, Extra, Winterfresh, Orbit, Eclipse, 5, Hubba Bubba, Life Savers, Altoids, and the list goes on…
3) They have high/stable profit margins; 4) And they are very constant and predictable businesses. Some other examples of such food/drink companies that Buffett owns (aside from the aforementioned Coke and See’s) are Anheuser-Busch, Diageo, Kraft Foods, and Procter & Gamble.
Why Engineer your investments like Buffett? He’s currently the World’s Richest Man of 2008 and was #2 to Bill Gates for years on end before that. He’s arguably the most successful investor of all time. He uses very simple methods that almost anyone can use and understand. What more can you ask for?
Why your financial advisor will not NEVER talk about Buffett’s methods of investing? Financial advisors never talk about Buffett for several reasons.
First of which, the companies he invests in are never flashy. There are no tech companies or anything cutting edge found in Berkshire’s portfolio. They are boring everyday companies like those talked about earlier.
Second, they are not penny stocks, IPOs or anything you can get rich off instantly within a year. Again everyday, well-managed, constantly increasing companies without anyone noticing.
Last and most importantly, they are just too simple and easy to make money off of. If your financial advisor said, “buy as much shares of Coke and Budweiser when they drop low and hold them forever”, what would you tell him? You’d tell him, “thanks for the tip, I’ll open an account with a discount broker and do that on my own,” and head towards the door.
(Disclosure: I currently own stock in Anheuser-Busch (BUD) and other stocks also owned by Berkshire-Hathaway. So everyone have a drink of Budweiser after work… and while you’re at it, don’t forget Michelob, Rolling Rock, Stella Artois, and Corona. Oh, and please drink responsibly… “Dude”)
Topics: Investing |
One Response to “Buffet To Buy Gum?”
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April 28th, 2008 at 9:45 pm
Look at Buffet says recession… I put my comments there.