The Acquirer's Multiple: How the Billionaire Contrarians of Deep Value Beat the Market

by Tobias E. Carlisle

In 2007, twenty-five years after Buffett bought it, See’s earned $82 million on $40 million in hard assets. That was an amazing 195 percent return on assets. The huge growth in profit—from $5 million to $82 million—happened without much more invested in its hard assets. See’s paid out to Buffett almost all the profit it made between 1972 and 2007: $1.4 billion. And See’s invested only $32 million to grow its hard assets ($40 million – $8 million = $32 million). Buffett got to use most of See’s $1.4 billion in profit to buy other high-profit businesses for Berkshire. This is why Buffett described See’s as “a dream business.” He compared See’s to an ordinary business. He guessed an ordinary business needed about $400 million in hard assets to make the same $82 million profit as See’s. Buffett means an ordinary business earns about 20 percent on its assets ($82 million ÷ $400 million = 20 percent). That’s very high. And it would still be worth less than See’s.