Warren Buffett Buys Wrigley
Apr 30th, 2008 by Martin Lee
Warren Buffett once again shows his preference for investing in easy to understand businesses when he teams up with candy maker Mars to buy Wm Wrigley Jr, the world’s largest chewing gum meaker for US$23 billion.
The recently announced deal meant that Berkshire Hathaway will have a minority stake in Wrigley. The purchase price of US$80 a share is a 28 per cent premium over Wrigley’s closing price of US$62.45 last Friday.
Billionaire Warren Buffett has just made a huge investment in railroads.
Railroads?
No, this isn’t 1870, or 1925, or even 1960.
Buffett invested more than $30 billion because he likes the freight hauling capacity of rails, which are presently underutilized because of the limp economy.
I like telephones, especially their ability to transport information and persuasion, instantaneously, across the city, the country and around the globe.
Buffett has been known for savvy investing in “boring” industries, having made a ton of dough, for example in GEICO insurance. Apart from the fact that they have become multi-media devices, telephones are a mundane, rather boring technology, as well. They’ve been in service longer than a century.
Yet, like railroads, they are underutilized in today’s businesses. Just as airfreight became the nemesis of rails, in the last decade, especially, the Internet has trumped the telephone as a medium of choice for attracting business and communicating with customers.