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For two years the share price fell. A crippling strike did not help, on top of the Watergate fall-out with threats to its TV licences. During the strike Katherine and Warren worked side-by-side rapping up newspapers into bundles and pasting labels by hand, often until 3am – they would go home filthy and exhausted.
Eventually things got straightened out; the strike was settled and Nixon’s administration crumbled. But it was not until three years after purchase that Berkshire Hathaway’s shares in the Washington Post Company climbed back to level at which Buffett had bought.
Katherine Graham leaned heavily on her new friend from Omaha, who she quickly recognised offered much wisdom regarding business and investment. Buffett was more than willing to allow Kay to draw from his well of experience and rationality. He also boosted her confidence by telling her how smart she was, which he truly believed.
So close was the relationship that she would even ask Warren to help her write speeches to groups such as Wall Street professionals. Warren also gave Kay lessons in accounting.
So again, we see Buffett clearly identifying the key person for one of his businesses, and then nurturing that individual as a friend and as a leader. Not second-guessing their operational decisions, but supporting them with advice when asked for, praise for work well done, and offering a listening ear when difficult decisions have to be made.
In this case Buffett had no real power as a shareholder, but he did have influence because Graham trusted him as a confidant and as a shrewd businessman. As his influence grew his status did morph into greater power after he was invited to join the board in autumn 1974, a position he thorough enjoyed. The memory of starting out as a newspaper delivery boy and now finding himself in a leadership role made it all the sweeter. And he was fascinated by journalism, even going so far as to say if he had not followed an investment career he would mostly likely have been a journalist.
As one of her best friends Buffett would stay in Graham’s home once a month prior to board meetings, becoming a familiar presence to her four children, who took to him like he was an uncle.
Leaving the board
Buffett stepped down from the board of WP in 1986 because he wanted a directorship at Capital Cities, a very successful media group Berkshire had bought into. The media regulator does not allow person to be a director of two companies, if one has television networks and the other cable television systems. Buffett figured he could retain influence at the Washington Post Company without being on the board.
When Capital Cities was sold to Disney in 1996 Buffett returned to the WP board.
Holding on to silk purses
In 1987 almost every share in the Berkshire portfolio was sold, except for three. One of the chosen was Washington Post. Here is his logic for holding on to these three even when the market was forcing share prices to expensive levels:
“We need to emphasize, however, that we do not sell holdings just because they have appreciated or because we have held them for a long time. (Of Wall Street maxims the most foolish may be “You can’t go broke taking a profit.”) We are quite content to hold any security indefinitely, so long as the prospective return on equity capital of the underlying business is satisfactory, management is competent and honest, and the market does not overvalue the business.
However, our insurance companies own three marketable common stocks that we would not sell even though they became far overpriced in the market. In effect………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1
