Warren Buffett’s Top Plays: #16 Pinkerton

Buffett purchased Pinkerton, a security services firm, for Blue Chip Stamps during 1976-1978. He increased his stake in Blue Chip from 34-41%. The purchase price for 37% of Pinkerton was $24m and 19% of Buffett’s net worth at that time. In 1983, Pinkerton was purchased by American Brands for $162m and Buffett’s return was 150% plus dividends. By owning multiple businesses, Buffett was able to leverage control over their capital but not over their operations. He used this method to turn his initial $510,000 into almost $2m by purchasing control of company A, using its cash to purchase control of company B, and using company B’s cash to purchase company C. Pinkerton was acquired by the Swedish security company Securitas in 1999.