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Richtodays

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Story From Textiles to Triumph
Warren Buffett took control of Berkshire Hathaway in 1965 and turned it into one of the most successful companies in the world. He bought 49% of the company in 1962, then gradually increased his ownership to over 50% in 1965. Buffett bought it because he thought it was a “good price” for its assets, which were valued at a much higher price than the stock price. . In later years, he admitted that buying Berkshire was not a good decision as textiles was a declining industry at the time.

In his 1989 annual letter, Buffett said, under the topic “Mistakes of the First Twenty-Five Years”: “My first mistake, of course, was buying control of Berkshire. Even though I knew that the business – textile manufacturing – was not promising , I was attracted to buy because they looked cheap. Such stock purchases proved quite profitable in my early years, although by the time Berkshire emerged in 1965 I was beginning to realize that this strategy was not ideal.”

Despite that being a mistake, Warren Buffett has his own reasons for buying Berkshire Hathaway and those reasons – including why it “looks cheap” – seem worth exploring further. This article will review some of the previously published reasons for this historic purchase and will add a more detailed exploration of Berkshire’s 1964 and 1965 financial statements providing insight into Buffett’s possible reasons for the purchase and why his stock looked cheap in the market when Buffett bought it.

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