Warren Buffett’s Top Plays: #2 Blue Chip stamps

Buffett and Charlie Munger used Blue Chip Stamps as an investment vehicle to acquire other businesses. The company was particularly useful for this purpose because it possessed a large float, which was money collected from customers who purchased merchandise and were handed stamps as a marketing giveaway. Retailers paid Blue Chip for the stamps, and customers could redeem items from Blue Chip when they had enough stamps. As some customers took time to redeem their stamps or lost them, Blue Chip had a large amount of money to invest in the meantime. The total purchasing price of Blue Chip’s core business was approximately $26 million from 1968 to 1974. Despite its decline in sales, the purchase of Blue Chip allowed Buffett to multiply the capital he could allocate to other businesses such as See’s Candies, Wesco Financial, and The Buffalo Evening News, which contributed to the success of Berkshire Hathaway and Buffett’s net worth.