Read on Twitter
History of GEICO is fascinating.
Graham's partnership bot 50% for $712K in '48. By '72, that stake was worth $400M. Profits from this investment outdid sum of all his other investments.
Starting in '76, Buffett 1/3 of GEICO for $45M. In '95, he bought the last 50% for $2.3B.
Graham's partnership bot 50% for $712K in '48. By '72, that stake was worth $400M. Profits from this investment outdid sum of all his other investments.
Starting in '76, Buffett 1/3 of GEICO for $45M. In '95, he bought the last 50% for $2.3B.
Funny thing is he bought GEICO because he had a ton of cash coming from $DIS takeout of Cap Cities.
As often happens, best investment is company you already own.
So he bought last share of GEICO valuing whole business at $4.6B. $PGR today has TEV of $63B.
As often happens, best investment is company you already own.
So he bought last share of GEICO valuing whole business at $4.6B. $PGR today has TEV of $63B.
Also fascinating that his initial 1/3 stake he bought for $45M by 1980 accounted for 50% of GEICO by 1995 due to share buybacks that Buffett didn't sell into.
And fact that Graham's single greatest bet by far came from investing in a growing business (i.e., not a cigar butt) tells you all you need to know about the value vs. ROIC approach to investing.
Though Graham did only pay .9x BV, so he got massive growth machine for below book.
Though Graham did only pay .9x BV, so he got massive growth machine for below book.
@JohnHuber72 has a great write-up on history of GEICO. http://sabercapitalmgt.com/case-study-the-story-of-geico-graham-and-buffett/
So all in, from 1976-95, Buffett invested $2.3-2.4B to acquire a business today whose most direct peer PGR has an enterprise value of $63B (equity value of $57B).
Not to mention the dividends accrued and the value of the float through today and into the future.
Just stunning.
Not to mention the dividends accrued and the value of the float through today and into the future.
Just stunning.
Also interesting Buffett paid $45MM for ~1/3 of GEICO in '76-80, implying he bot when GEICO equity value was ~$135M. Then paid $2.3B for remaining 50% in '95, implying he bot remainder at equity val of $4.6B.
Paying higher prices as business strengthens can make lot of sense.
Paying higher prices as business strengthens can make lot of sense.
