Warren Buffett makes great profits from Scott Fetzer

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Scott Fetzer is one of Buffett and Munger’s greatest ever investments. For only £315.2m Berkshire Hathaway bought a company producing more than $35.6m after-tax in the first year of ownership, 1986.  And it just kept rising, to more than $56.5m in 1990 and more than $83m in 2002 – see chart. After that we lack publicly available information, but it is reasonable to surmise that it is doing at least as well today despite the slowdown at World Book.

I’ve written “more than” in the last paragraph because on top of the numbers shown there was a profitable Scott Fetzer Financial Group, a credit company holding both World Book and Kirby receivables; BH included the profits from this unit within a separate subsidiary.  This initially also included Mutual Savings, but was joined by other finance operations as Berkshire bought more companies.

Buffett extracted the numbers for Scott Fetzer’s finance operations in 1990 to write that £12.2m pre-tax was made.  So, the total 1990 after-tax profit from Scott Fetzer was $56.5m + $8.1m =$64.6m.  From other data we can figure that in the late 1980s the Scott Fetzer finance operations produced annual after-tax profits of the order of $3-4m; and in the early 1990s $8-10m.

In the chart Scott Fetzer Manufacturing Group comprises the businesses other than World Book, Kirby and the finance operation.  There were no additions or disposals of subsidiaries over these years. In the late 1980s the companies under Ralph Schey’s command were contributing about 40% of Berkshire’s non-insurance earnings.

Source: Berkshire Hathaway Annual Reports, 1986-2002

World Book’s progress

In the 1980s World Book was a real jewel; unit vol

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