Warren Buffett’s Top Plays: #18 Capital Cities abc

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      Lesson summary:

      Warren Buffett’s 18th most important investment was in Capital Cities-ABC, a media company that he helped finance through Berkshire. In exchange for $516 million, Berkshire received about 18% of the merged companies. Based on 1986 earnings, Buffett purchased at a P/E ratio of 16, betting 17% of his net worth on this single transaction. In 1993, 1/3 of the holding was sold for $600 million, with 2/3 still intact. In 1996, Disney acquired Capital Cities-ABC for $1.2 billion in cash and $1.3 billion in stock, yielding a profit of $2.6 billion and a return of 500%. Two reasons for Buffett’s interest in Capital Cities were its valuable properties, such as TV and radio stations, and its excellent management. Buffett had known about Capital Cities for a long time and waited approximately 10 years for the right price, demonstrating the importance of patience in investing.

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