Don't Miss Warren Buffett's Hidden $3.1 Billion Acquisitions

Though investors continue to dissect Warren Buffett's every move, these acquisitions have received surprisingly little attention.

Mar 23, 2014 at 1:00PM

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Photo: HomeServicesAmerica

Since Warren Buffett released his latest annual letter to Berkshire Hathaway (NYSE:BRK-A)(NYSE:BRK-B) shareholders a few weeks ago, we've not only been happily inundated with torrents of new investing wisdom, but also received a fresh look at the incredible business he built.

By detailing two small real estate investments he made more than 20 years ago, for example, Buffett reiterated, "you don't need to be an expert in order to achieve satisfactory investment returns."

We also learned he's surprisingly bullish on Bank of America over the long term, received details on the $77.2 billion insurance float he gets to invest for free, and were treated to dozens of insightful new quotes covering everything from the folly of panic selling to Berkshire's joint acquisition of Heinz last summer.

Don't miss this important move
However, one crucial topic has garnered surprisingly little attention: Berkshire's smaller bolt-on acquisitions.

Here's what Buffett had to say:

While Charlie and I search for elephants, our many subsidiaries are regularly making bolt-on acquisitions. Last year, we contracted for 25 of these, scheduled to cost $3.1 billion in aggregate. These transactions ranged from $1.9 million to $1.1 billion in size.

In case you're wondering, that $1.1 billion buy was a likely reference to Berkshire's late-2013 acquisition of IMI's beverage dispenser business through Marmon. On average, that means each of Berkshire's remaining 24 acquisitions cost a comparatively minuscule $83.3 million.

Buffett went on to elaborate:

Charlie and I encourage these deals. They deploy capital in activities that fit with our existing businesses and that will be managed by our corps of expert managers. The result is no more work for us and more earnings for you. Many more of these bolt-on deals will be made in future years. In aggregate, they will be meaningful.

Meaningful indeed
Call me crazy, but I think it's remarkable any company can quietly spend more than $3 billion to absorb dozens of businesses over the course of a single year. Sure, it's only equivalent to roughly 1% of Berkshire Hathaway's current $303 billion market capitalization, but these little guys add up.

If this all sounds familiar, it's because Buffett wrote almost exactly the same thing in last year's letter. Only then, Berkshire had just finished spending around $2.3 billion to acquire 26 companies -- good for an average purchase price of $88.5 million.

Over the last two years, that makes $5.4 billion Berkshire Hathaway has spent snapping up smaller companies to grow its own empire.

And why not? While the "elephants" that meet Buffett's standards are few and far between, you can bet there are hundreds of satisfactory smaller targets just ripe for the picking.

Perhaps best of all -- in keeping with Buffett's long-held acquisition practices -- these companies can be sure they'll have a home with Berkshire Hathaway for as long as it exists. 

In the business world, that's as close to "forever" as anyone can get.

More wisdom from Warren
While its value is seemingly infinite, Warren Buffett has freely offered an enormous number of investing tips to Berkshire Hathaway shareholders over the years. If you want more from Buffett, now you can tap into the best of his wisdom in a new special report from The Motley Fool. Click here now for your free copy of this invaluable report.

Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Berkshire Hathaway. The Motley Fool owns shares of Bank of America and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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