Warren Buffett’s Top Plays: #23 Scott Fetzer

Scott Fetzer was a conglomerate of businesses with World Book encyclopedias and Kirby vacuum cleaners as its largest operations, representing more than 50% of its earnings. In 1986, Berkshire Hathaway purchased Scott Fetzer for $315 million, the first time Warren Buffett bought an entire business and not just shares. The company had $40.6 million in net earnings in 1984 and the purchase was made at a P/E ratio of about 8. It’s uncertain how profitable the deal has been, but Scott Fetzer distributed $1 billion in dividends to Berkshire in its first 15 years under its ownership. Warren Buffett was interested in Scott Fetzer as it was large, well-managed, and a good earner, matching the type of businesses he wished to purchase. The owners of Scott Fetzer failed to sell the business in 1985 and an investment banker offered a book on the company to Buffett’s right-hand man, Charlie Munger, who responded with a lesson to make one’s own investment decisions and not listen to investment bankers who are paid to sell the company.