Thread by @CostaVerdeCap, 1/6 Awesome passage on price vs. quality, from 1979 BRK letter: "In [...]

Costa Verde Capital

CostaVerdeCap

1/6 Awesome passage on price vs. quality, from 1979 BRK letter: "In some businesses--a network TV station, for example--it is virtually impossible to avoid earning extraordinary returns on tangible capital employed in the business."

2/6 "And assets in such businesses sell at equally extraordinary prices, one thousand cents or more on the dollar, a valuation reflecting the splendid, almost unavoidable, economic results obtainable. Despite a fancy price tag, the & #39;easy& #39; business may be the better route to go."

3/6 "We can speak from experience, having tried the other route. Your Chairman made the decision a few years ago to purchase Waumbec Mills in Manchester, New Hampshire, thereby expanding our textile commitment."

4/6 "By any statistical test, the purchase price was an extraordinary bargain; we bought well below the working capital of the business and, in effect, got very substantial amounts of machinery and real estate for less than nothing. But the purchase was a mistake . . ."

5/6 "Both our operating and investment experience cause us to conclude that & #39;turnarounds& #39; seldom turn, and that the same energies and talent are much better employed in a good business purchased at a fair price than in a poor business purchased at a bargain price . . ."

6/6 Buffett lays it out SO clearly here. Better to purchase the & #39;easy& #39; business at 1,000 cents on the dollar than the poor business for less than working capital (with machinery and real estate thrown in)!

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