Washington post, a classic buy and a 100 bagger

As reported in the letters to shareholders, Warren invested 10 million in Washington post in 1973. It has to be one of his most successful investments of all time. Due to lack of data on washington post in the 1970s i can only make intelligent guesses while getting to why Warren bought Washington Post. In his letters to shareholders, he claimed that he bought Washington Post at and average price of $5.63. Using Thomson Financial, i could only get the net income of Washington Post back to 1980. Assuming that net income was similar to 1973's net income of Washington Post back to 1980 and there was no growth in per share net income since 1973, the quick and dirty method for calculating the intrinsic value without efforts for discounting would be:

14 million shares oustanding

Dirty intrinsic value= (30 million x 10 years)/14 million shares outstanding = $21.42 per share

Average price paid by Warren= $5.63

If you asked me, he was essentially buying $21.42 worth of earnings with $5.63 and that is assuming no growth. However, Washinton Post did grow its per shares earnings and hence $21.41 seems to be a conservative valuation. Even at that time, Warren also did feel that the Washington Post was worth approximately 4 to 5 times its average share price in 1973.

Subsequently, Warren managed to influence management through Katherine Graham to perform share buybacks thereby increasing per share intrinsic value. Today, Warren's 10 million investment in WashingtonPost has blossomed to a market value in excess of 1 billion. Thats a 100 bagger for the record!