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Wednesday, December 25, 2013

3 Things Shared by Warren Buffett's Best Investments

Berkshire Hathaway (NYSE: BRK-A  ) (NYSE: BRK-B  ) didn't grow to become a $290 billion company without some help. Having Warren Buffett at the helm helped a lot.

As Chairman of Berkshire, Buffett's made several outstanding investments in industries ranging from financial services to consumer products. And although these investments differed in some ways, they all shared surprising similarities.

1. Brands that have pricing power
Warren Buffett looks for companies that can survive and thrive over decades, and even centuries. One common attribute of Buffett's best portfolio companies is pricing power -- the ability to pass on price increases to consumers.

See's Candies is an excellent example. Berkshire Hathaway purchased the company for $25 million in 1972. Today, it earns $80 million per year. See's Candies has not grown tremendously -- it's still a West Coast confectioner -- but it has raised prices. In fact, Buffett's raised prices every single year for 41 years since he acquired the company.

Other Berkshire mainstays have this attribute. Coca-Cola prices have only gone up over time. In a similar vein, automobile values have gone up over history, and so have the insurance premiums Geico charges its customers. Prices for consumer goods have only risen, driving merchant processing volume at American Express.

When a brand has pricing power, it benefits from the consistent, perpetual tailwinds of inflation.
Warren Buffett
Warren Buffett
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