Charlie Munger’s Sit-on-Your-Ass Investing Concept

Charlie Munger presented the model of “Sit on your ass investing” at the 2000 Berkshire Hathaway Annual meeting. Description courtesy of Losch Management Company, an Orlando, Florida-based investment advisor.

'Charlie Munger: The Complete Investor' by Tren Griffin (ISBN 023117098X) You have value investing, and growth investing, but now we also have “sit on your ass investing”, which is better.

The problem with value investing is it requires too much work.

First you have to find an undervalued stock and buy it cheap. Then you have to sell it when it the price reaches or exceeds your calculated figure for its intrinsic value.

Because this requires many decisions over a long period of time, Charlie Munger prefers his own method in which all you have to do is pick a really great company when it is attractively priced, and then just sit on your ass. The great advantage being that it only requires one decision.

Charlie said: “If you buy a business just because it’s undervalued then you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies then you can sit on your ass … that’s a good thing.”

The whole idea of not having to do something extraordinary is one all investors should heed, yet it is easy to forget, particularly in stressful situations.

Recommended Reading: ‘Charlie Munger: The Complete Investor’ by Tren Griffin

Mungerisms: Amusing Quotes from Charlie Munger from the Berkshire Hathaway 2014 Annual Meeting

Amusing Quotes from Charlie Munger from the Berkshire Hathaway 2014 Annual Meeting

Charlie Munger is not always politically correct, always offers a wealth of information, and hilarious now and then. At the 2014 annual meeting of Berkshire Hathaway, here are some of his best zingers:

  • On the interplay between CEOs and corporate directors regarding compensation: “You start paying directors of corporations two or three hundred thousand dollars a year, it creates a daisy chain of reciprocity where they keep raising the CEO and he keeps recommending more pay for the directors.”
  • On CEO pay and work habits: “Does the Supreme Court work less hard because they don’t get paid like corporate executives? We have some corporate directors who draw more pay than members of the Supreme Court. That’s crazy,”
  • 'Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger' by Peter D. Kaufman and Ed Wexler (ISBN 1578645018) On taxing the 1%: “The taxes on wealth were much higher when I was much younger. So for somebody of my age, I don’t think they’re ruining the world because I’ve lived through way more punitive taxes on the rich than we have now … I don’t think everybody who’s been especially favored should take the last dollar that he or she should get. I think we all have an obligation to dampen these fires of envy.”
  • On Facebook, Twitter, and the appeal of social media: “It just doesn’t interest me at all to gab all the time on the Internet with people and I certainly hate the idea of young people putting in permanent form the dumbest thoughts and the dumbest reports of action that you can ever imagine.”
  • On his favorite advance in technology: “I’m in love with the Xerox machine.”
  • On Donald Sterling, the then-owner of NBA Clippers, who then faced racial remarks and lifetime ban:”He’s a peculiar man. He’s past 80. His girlfriend has had so many facelifts she practically can’t smile. This is not the noblest ideal of what the American businessman should be.”

Insightful books about Charlie Munger

Prem Watsa’s Recommended Books for 2015

Prem Watsa of Fairfax Financial Holdings (Canada)

Legendary investor and philanthropist John Templeton was Prem Watsa’s mentor and was deeply interested in spiritual growth. In the past, Watsa has recurrently recommended Templeton’s “Riches for the Mind and Spirit”, “The Templeton Plan”, and “Discovering Laws of Life”.

Legendary investor and philanthropist John Templeton In the Fairfax Financial Holdings’ annual meetings in previous years, Watsa has also highlighted an inspirational movie called “The Little Red Wagon” that the Templeton Foundation supported. In an interview with online investment community Gurufocus, Watsa previously said,

But I try to be neutral, sometimes more short than long, but that’s John Templeton. So John, one of the key lessons he taught me was to be flexible. His investment philosophy was always value oriented, long term, buy at the point of maximum pessimism, but be flexible in your thinking, and that’s what we try to apply.

Books Recommended by Prem Watsa at Fairfax’s Annual Meeting on 16-Apr-2015

At the annual meeting of shareholders of Fairfax Financial Holdings Limited on 16-Apr-2015 at the Roy Thomson Hall in Toronto, Prem Watsa recommended the following books:

  1. John Templeton’s “Riches for the Mind and Spirit”. Watsa mentioned a quote about giving that he said Fairfax feels very strongly about: “Self-improvement comes mainly from trying to help others.” In speaking of Fairfax’s philanthropic efforts, Watsa also said it’s better to help the receivers grow.
  2. Stephen G. Post’s “Is Ultimate Reality Unlimited Love?” For fifteen years, Post held discussions with John Templeton on the topic of pure unlimited love. The book covers how John Templeton arrived at his philosophy as a youth growing up in Tennessee. This book draws from previously unpublished letters and interviews with physicists, theologians, and other close associates and family of John Templeton.
  3. 'Investing the Templeton Way' by Lauren Templeton, Scott Phillips (ISBN 0071545638) Lauren Templeton and Scott Phillips’s “Investing the Templeton Way”. Lauren Templeton is the grand-niece of John Templeton and Scott Phillips is her husband. Together, they run Chattanooga, Tennessee-based Templeton & Phillips Capital Management. Investing the Templeton Way focuses on the critical role of temperament, and how mastering this element to investing equips the investor to succeed across the span of time and varying market circumstances.
  4. Louis V. Gerstner, Jr.’s “Who Says Elephants Can’t Dance?” This book is an account of IBM’s historic turnaround led by Gerstner during his tenure as chairman and CEO of IBM from April 1993 until March 2002. Gerstner led IBM from the brink of bankruptcy and mainframe obscurity back into the forefront of the technology business.

The Four Filters of Warren Buffett and Charlie Munger

Charlie Munger and Warren Buffett, Berkshire Hathaway

Countless portfolio managers, hedge fund managers, investment analysts, mutual funds, institutional pools of capital and individual investors have grown up devouring everything that’s been said or written by or about Warren Buffett and Charlie Munger over the years.

In the 2007 letter to Berkshire Hathaway shareholders, Warren Buffett wrote, “Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.” Based on this sage advice, value investors must look for:

  • A business that we can understand. A business within your circle of competence.
  • A business with favorable long-term prospects. A business with a line of business that is not easy to duplicate. A business with excellent cash flow profile: excellent ability to generate and invest cash.
  • A business led and perated by honest and competent people.
  • A business available for sale at a very attractive price.

Prem Watsa’s Recommended Books for 2014

Prem Watsa of Fairfax Financial Holdings (Canada)

Prem Watsa is a shrewd investor who is often called the Canadian Warren Buffett. He is an immigrant from India who arrived in Canada in 1972 and has been running Fairfax Financial Holdings since 1985. Prem Watsa was born in Hyderabad and studied chemical engineering at IIT-Chennai before emigrating to Canada. Under his leadership, Fairfax’s sales and earnings have been growing and it’s stock price has compounded at the average rate of 19 percent annually.

On understanding and managing risk, Prem Watsa has said, “this idea exists in the marketplace that you can take any risk, put it into a structure, into an asset-backed bond, and you can eliminate, get rid of the risk. … Protect yourself, you don’t know when Katrina comes in.”

Here are five books recommended by Prem Watsa at the 2014 annual meeting of Fairfax Financial Holdings on 09-Apr-2014, Wednesday at Toronto’s Roy Thomson Hall.

Books Recommended by Berkshire Hathaway’s Charlie Munger

“In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”
— Charlie Munger

Charlie Munger (Vice-Chairman at Berkshire Hathaway) and Mugerisms Charlie Munger is Warren Buffett’s partner and Vice-Chairman at Berkshire Hathaway, the investment conglomerate. In his capacity, Munger has been a behind-the-scenes co-thinker at Berkshire and has influenced many a decision made by Warren Buffett.

At the 2004 annual meeting of Berkshire Hathaway, Charlie Munger said,

“We read a lot. I don’t know anyone who’s wise who doesn’t read a lot. But that’s not enough: You have to have a temperament to grab ideas and do sensible things. Most people don’t grab the right ideas or don’t know what to do with them.”
— Charlie Munger

Munger was chair of Wesco Financial Corporation from 1984 through 2011. He is also the chair of the Daily Journal Corporation, based in Los Angeles, California, and a director of Costco Wholesale Corporation. Unlike Warren Buffett, Charlie Munger has claimed that he is a generalist for whom investment is only one of a broad range of interests that include architecture, philosophy, philanthropy, investing, yacht-design, etc.

Charlie Munger is a voracious reader and engages in books on history, science, biography and psychology. He once said, “In my whole life, I have known no wise people (over a broad subject matter area) who didn’t read all the time—none, zero. You’d be amazed at how much Warren reads—at how much I read. My children laugh at me. They think I’m a book with a couple of legs sticking out.”

At the 2014 annual meeting of The Daily Journal Company that Charlie Munger leds as Chairman, Charlie said,

“I’m very selective. I, sometimes, skim. I, sometimes, read one chapter and I sometimes read the damn thing twice. It’s been my experience in life [that] if you just keep thinking and reading, you don’t have to work.”

Charlie Munger’s Book Recommendations in Biography

Charlie Munger’s Book Recommendations in Biology

Charlie Munger’s Book Recommendations in Business & Investing

Charlie Munger’s Book Recommendations in Management & Leadership

Charlie Munger’s Book Recommendations in Philosphy & Psychology

Charlie Munger’s Book Recommendations in Sociology

Warren Buffett, the Mattress Salesman at Nebraska Furniture Mart

One of the traditions at the Berkshire Hathaway annual meetings is an hour-long light-hearted movie show. In fact, the “movie” is a collection of video clips some of which showcase commerials and skits from Berkshire Hathaway’s vast array of businesses, some featuring Buffett-comedy, surprise celebrity features, and so on, often to wild laughter among the crowd.

'Tap Dancing to Work: Warren Buffett on Practically Everything' by Warren Buffett with Carol Loomis (ISBN 1591845734) In 2013, the Berkshire Hathaway video started with a cartoon version of Dancing with the Stars with Warren Buffett and partner Charlie Munger as judges. After the judges dismissed every contestant, including Dairy Queen and the Geico Gecko, the judges themselves won the contest by dancing to the Gangnam Style. The 2013 movie also had clips of Warren Buffett and Fortune Magazine’s Carol Loomis appearing on the Daily Show with Jon Stewart to promote “Tap Dancing to Work: Warren Buffett on Practically Everything”. A humorous debate over “ketchup” vs. “catsup” from the sitcom King of Queens highlighted Berkshire Hathaway’s buyout of H.J. Heinz Company (in partnership with Brazil’s 3G Capital.)

In recent years, the “movie” has also featured Warren Buffett’s opening statement to a Committee of the U.S. House of Representatives on the Salomon Saga. “Lose money for the firm, and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless,” warns Mr. Buffett at the end of that opening statement.

The security staff at the Berkshire Hathaway meetings forbid attendees from recording audio or video from the opening movie due to confidentiality and copyright restrictions. At the beginning of the movie, a voice-over or video recording from Warren Buffett assures appearances from “a number of people you recognize” and reminds that the celebrities work for free, at the request of the notoriously stingy Buffett. “Surprise, surprise.”

Over the years, the most popular clips in the movie feature a hilarious Warren Buffett attempting at diverse jobs in Berkshire’s businesses. Here’s one from Berkshire’s furniture business, Nebraska Furniture Mart.

The Warren and Charlie Show at Berkshire Hathaway’s Annual Meetings

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

At the Berkshire Hathaway annual shareholders meetings in Omaha, Warren Buffet and Charlie Munger sit at the center of the stage in front of a dark sea of shareholders. Warren Buffet first fields questions from the audience and a panel of journalists and stock analysts. Warren answers them and will ramble on a bit in his unique way (often with a one-liner or two mixed in) for a few minutes.

Then, Warren will look over to his partner and query, “Charlie?” Then Charlie Munger will either lean in and make a sharp, critical, pithy, often derisive comment (which usually extracts gasps or loud chuckles from the audience) or simply remark, “I have nothing to say,” which can be entertaining particularly after a long-winded digression from Warren Buffett.

Berkshire Hathaway annual shareholders meetings are normally held on the first Saturday of May in Omaha, Nebraska.

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

Berkshire Hathaway Annual Meetings

Recommended Reading

A Definitive Guide to Berkshire Hathaway’s 2014 Annual Shareholders Meeting

Berkshire Hathaway Annual Meetings

Value Investing Conference and Genius of Warren Buffett Course

Shareholder Events on 02-May-2014, Friday

Cocktail Reception at Borsheim's Fine Jewelry for Berkshire Hathaway Shareholders

Tent at the Berkshire Hathaway Cocktail Reception

  • Cocktail Reception at Borsheim's Fine Jewelry for Berkshire Hathaway Shareholders 6:00 PM to 9:00 PM: Cocktail Reception at Borsheim’s Fine Jewelry. Borsheim’s is Berkshire’s flagship jewelry retailer and the second biggest jewelry store in the world. This cocktail reception is exceptionally crowded. And Borsheim’s also sets a tent in the parking lot to accommodate the swarms of people enjoying the dinner buffet, open bar, and live musical entertainment, all complimentary. Vegetarians can get their fill of broccoli, cauliflower, carrots, and crackers. Location: Borsheim’s, 120 Regency Parkway, Omaha NE 68114 [map], (800) 642-4438.

Berkshire Hathaway Annual Shareholders' Meeting at CenturyLink Center, Omaha

Shareholder Events on 03-May-2014, Saturday

  • 7:00 AM: Doors Open at CenturyLink Center for the annual meeting. Shareholders, young and old, assemble hours before the opening of the doors to the CenturyLink center and, as soon as the doors are unlocked, run as quickly as they can to get the best seats in the house.
  • 7:00 AM: Complementary breakfast: free pastries and bottled drinks in the stands at CenturyLink Center.

Fruit of the Loom store at Berkshire Hathaway Annual Meeting Shopping

Challenge Warren Buffett in Newspaper Tossing Challenge at the Berkshire Hathaway Annual Shareholders' Meeting

NetJets display of Signature Flight Support at Berkshire Hathaway Annual Shareholders' Meeting

  • 12:00 PM to 5:00 PM: NetJets Display. “Signature Flight Support” on the east side of the Omaha airport. Collect passes to the NetJets display at the NetJets stall in the shopping area. Shuttle busses leave the northwest corner of the CenturyLink Center. On display are a fleet of NetJets aircraft “sure to set your pulse racing. Warren urges, “Come by bus; leave by private jet. Live a little.”
  • 12:00 PM to 1:00 PM: Buy-your-own lunch at CenturyLink’s stands.
  • 3:30 PM to 3:45 PM: Recess / regrouping
  • 3:45 PM to 4:00 PM: “Official business” part of the Berkshire Hathaway annual shareholders meeting.

Berkshire Cookout at Nebraska Furniture Mart

Big Time Cookout at Nebraska Furniture Mart (NFM) for Berkshire Hathaway Shareholders

Shareholder Events on 04-May-2014, Sunday

Warren Buffett tries to soften up U.S. Olympian Ariel Hsing in Ping Pong at the Borsheim's Shopping Day

Throughout the Week: Shareholder Discounts and Shopping

  • At Borsheim’s Fine Jewelry, shareholder prices will be available from Monday 28-Apr-2014 through Saturday 10-May-2014. Borsheim’s is usually open 10:00 AM to 8:00 PM on Mondays and Thursday, 10:00 AM to 6:00 PM on Tuesdays, Wednesdays, and Fridays, and 10:00 AM to 5:30 PM on Saturdays. Borsheim’s is located at 120 Regency Parkway, Omaha NE 68114 [map]. Most of the items in Borsheim’s are discounted no less than 30% for Berkshire shareholders.
  • At Nebraska Furniture Mart (NFM,) shareholder prices will be available from Monday, April 28th through Saturday, May 10th. Nebraska Furniture Mart is located at 700 S 72nd St, Omaha NE 68114 [map]. NFM is open 10:00 AM to 9:00 PM Monday through Saturday and 10:00 AM to 6:00 PM on Sundays. Shareholder discounts are also available at Nebraska Furniture Mart’s stores in Kansas City and Des Moines (no furniture; just appliances, electronics, and flooring.)

Getting Meeting Credentials

Berkshire Hathaway Annual Shareholders' Meeting Credentials Meeting credentials are required to enter the CenturyLink Center for the Berkshire Hathaway meeting or the adjoining area to hit the stores of the many Berkshire subsidiaries. Meeting credentials are also required to get special shareholder pricing at Borsheims, Nebraska Furniture Mart, and other stores that might offer shareholder discounts.

Berkshire Hathaway meeting credentials are no more than a plastic identification card and an associated lanyard. The identification card is not personalized and does not contain the shareholder’s or attendee’s name.

Here’s how to get your meeting credentials:

  • If you are a shareholder, your brokerage will send you the annual shareholders’ packet along with a postcard to request a maximum of four passes for the Berkshire annual meeting. Fill this postcard and drop it in the mail. Berkshire will send you passes and lanyards.
  • If you are a shareholder, but do not have time to request the passes, did not receive the passes, or did not receive the shareholder packet from your broker, take proof of your ownership of Berkshire Hathaway stock. Take a statement of your holdings from your broker to the annual meeting at the CenturyLink Center on the Friday afternoon or Saturday morning of the annual meeting to get your meeting credentials.
  • Many years ago, Berkshire Hathaway shareholders started auctioning the annual meeting passes on eBay for a premium. To hinder this premium, Berkshire Hathaway started directly selling two passes for $5 on eBay, with free shipping. “We decided to sell them ourselves on EBay at a nominal price to keep people from getting stung. We hope nobody pays more than what we charge which is basically to cover mailing charges,” a Berkshire Hathaway representative had informed Omaha World-Herald. Buyers could provide a mailing address when you checkout or just collect their passes from the CenturyLink Center on the Friday afternoon or Saturday morning of the Berkshire meeting.
  • If you are straining at the leash to go to the annual meeting and don’t have passes, just show up early on Saturday morning at the CenturyLink Center. I have seen shareholders in the line obliging to requests for passes from devoted fans of Berkshire; this practice needs to be discouraged.

Recommended Reading: “The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other”

‘The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other’ by Steve Jordon, Omaha World Herald

'The Oracle & Omaha, How Warren Buffet and His Hometown Shaped Each Other' by Steve Jordon, Omaha World Herald (ISBN 0615793940)

Warren Buffett in 1951: “The Security I Like Best:” GEICO

Government Employees Insurance Company (GEICO)

In his 2013 annual letter to Berkshire Hathaway Shareholders, Warren Buffet extols his mentor Ben Graham’s discourse on value investing, “The Intelligent Investor.” Warren has previously described The Intelligent Investor as “by far the best book on investing ever written.”

I learned most of the thoughts in this investment discussion from Ben’s book The Intelligent Investor, which I bought in 1949. My financial life changed with that purchase.


'The Intelligent Investor: The Definitive Book on Value Investing' by Benjamin Graham, Jason Zweig (ISBN 0060555661) A couple of interesting sidelights about the book: Later editions included a postscript describing an unnamed investment that was a bonanza for Ben. Ben made the purchase in 1948 when he was writing the first edition and—brace yourself—the mystery company was GEICO. If Ben had not recognized the special qualities of GEICO when it was still in its infancy, my future and Berkshire’s would have been far different.


When I was first introduced to GEICO in January 1951, I was blown away by the huge cost advantage the company enjoyed compared to the expenses borne by the giants of the industry. That operational efficiency continues today and is an all-important asset. No one likes to buy auto insurance. But almost everyone likes to drive. The insurance needed is a major expenditure for most families. Savings matter to them—and only a low-cost operation can deliver these.

Warren Buffett's 1951 Analysis Article: 'The Security I Like Best': GEICO

Warren Buffett’s 1951 Analysis Article: “The Security I Like Best”: GEICO

In 1951, Warren Buffett made his first purchase of GEICO stock In the 06-Dec-1961 (Thursday) edition of The Commercial and Financial Chronicle, a weekly business newspaper in the United States, Warren Buffett published an article on his analysis of the GEICO stock. He described GEICO, Government Employees Insurance Company, as the “The Security I Like Best.” Warren E. Buffett was then the principal of Omaha, NE, Buffett-Falk & Co. Below is a copy of Warren’s article; a facsimile of the article is also available in the PDF format: Warren_Buffett_-_The_Security_I_Like_Best.pdf.

This article is educational because it clearly shows the considerations that Buffett used to probe the company and evaluate its stock. The way of thinking of how Buffett and Berkshire Hathaway came to own GEICO provides a pattern of how to find and research any investment.

The Security I Like Best: The Government Employees Insurance Co. (GEICO)

Full employment, boom time profits and record dividend payments do not set the stage for depressed security prices. Most industries have been riding this wave of prosperity during the past five years with few ripples to disturb the tide.

The auto insurance business has not shared in the boom. After the staggering losses of the immediate postwar period, the situation began to right itself in 1949. In 1950, stock casualty companies again took it on the chin with underwriting experience the second worst in 15 years. The recent earnings reports of casualty companies, particularly those with the bulk of writings in auto lines, have diverted bull market enthusiasm from their stocks. On the basis of normal earning power and asset factors, many of these stocks appear undervalued.

The nature of the industry is such as to ease cyclical bumps. The majority of purchasers regards auto insurance as a necessity. Contracts must be renewed yearly at rates based upon experience. The lag of rates behind costs, although detrimental in a period of rising prices as has characterized the 1945-1951 period, should prove beneficial if deflationary forces should be set in action.

Other industry advantages include lack of inventory, collection, labor and raw material problems. The hazard of product obsolescence and related equipment obsolescence is also absent.

Government Employees Insurance Corporation was organized in the mid-30’s to provide complete auto insurance on a nationwide basis to an eligible class including: (1) Federal, State and municipal government employees; (2) active and reserve commissioned officers and the first three pay grades of non-commissioned officers of the Armed Forces; (3) veterans who were eligible when on active duty; (4) former policyholders; (5) faculty members of universities, colleges and schools; (6) government contractor employees engaged in defense work exclusively, and (7) stockholders.

The company has no agents or branch offices. As a result, policyholders receive standard auto insurance policies at premium discounts running as high as 30% off manual rates. Claims are handled promptly through approximately 500 representatives throughout the country.

The term “growth company” has been applied with abandon during the past few years to companies whose sales increases represented little more than inflation of prices and general easing of business competition. GEICO qualifies as a legitimate growth company based upon the following record:

Year— Premiums Written Policy Holders
1936 $103,696.31 3,754
1940 768,057.86 25,514
1945 1,638,562.09 51,697
1950 8,016,975.79 143,944

Of course the investor of today does not profit from yesterday’s growth. In GEICO’s case, there is reason to believe the major portion of growth lies ahead. Prior to 1950, the company was only licensed in 15 of 50 jurisdictions including D. C. and Hawaii. At the beginning of the year there were less than 3,000 policyholders in New York State. Yet 25% saved on an insurance bill of $125 in New York should look bigger to the prospect than the 25% saved on the $50 rate in more sparsely settled regions.

As cost competition increases in importance during times of recession, GEICO’s rate attraction should become even more effective in diverting business from the brother-in-law. With insurance rates moving higher due to inflation, the 25% spread in rates becomes wider in terms of dollars and cents.

There is no pressure from agents to accept questionable applicants or renew poor risks. In States where the rate structure is inadequate, new promotion may be halted.

Probably the biggest attraction of GEICO is the profit margin advantage it enjoys. The ratio of underwriting profit to premiums earned in 1949 was 27.5% for GEICO as compared to 3.7% for the 135 stock casualty and surety companies summarized by Best’s. As experience turned for the worse in 1950, Best’s aggregate’s profit margin dropped to 3.0% and GEICO’s dropped to 13.0%. GEICO does not write all casualty lines; however, bodily injury and property damage, both important lines for GEICO, were among the least profitable lines. GEICO also does a large amount of collision writing, which was a profitable line in 1950.

During the first half of 1951, practically all insurers operated in the red on casualty lines with bodily injury and property damage among the most unprofitable. Whereas GEICO’s profit margin was cut to slightly above 9%, Massachusett’s Bonding & Insurance showed a 26% loss, New Amsterdam Casualty an 8% loss, Standard Accident Insurance a 9% loss, etc.

Because of the rapid growth of GEICO, cash dividends have had to remain low. Stock dividends and a 25-for-1 split increased the outstanding shares from 3,000 on June 1, 1948, to 250,000 on Nov. 10, 1951. Valuable rights to subscribe to stock of affiliated companies have also been issued.

Benjamin Graham has been Chairman of the Board since his investment trust acquired and distributed a large block of the stock in 1948. Leo Goodwin, who has guided GEICO’s growth since inception, is the able President. At the end of 1950, the 10 members of the Board of Directors owned approximately one third of the outstanding stock.

Earnings in 1950 amounted to $3.92 as contrasted to $4.71 on the smaller amount of business in 1949. These figures include no allowance for the increase in the unearned premium reserve which was substantial in both years. Earnings in 1953 will be lower than 1950, but the wave of rate increases during the past summer should evidence themselves in 1952 earnings. Investment income quadrupled between 1947 and 1950, reflecting the growth of the company’s assets.

At the present price of about eight times the earnings of 1950, a poor year for the industry, it appears that no price is being paid for the tremendous growth potential of the company.

In 1951, Warren Buffett made his first purchase of GEICO stock. In 1996, Warren Buffett purchased all outstanding stock of GEICO, and folded GEICO into the Berkshire Hathaway umbrella as a subsidiary company. GEICO is part of the most noteworthy of Berkshire Hathaway’s businesses: the insurance business.

Insurance ‘Float’: A Significant Enabler of Berkshire Hathaway’s Success

Warren Buffett with GEICO's Gekko Berkshire Hathaway’s insurance operations provides Warren Buffett the ‘float’ that has been critical to his success as an investor. This float is money that Berkshire Hathaway holds to pay insurance claims at some point in the future, but in the intervening time can be put to work in stocks and long-term investments that earn returns for Berkshire. In effect, float constitutes borrowed funds at little or no cost. It enables Berkshire Hathaway to purchase businesses and assets beyond what Berkshire Hathaway’s cash and capital would allow. Other than GEICO, Berkshire Hathaway’s major insurance operations include Berkshire Hathaway Reinsurance Group and General Re.

GEICO is today the second largest auto insurer in the United States. GEICO’s mascot is a Gold dust day gecko with a Cockney accent. GEICO is well known in popular culture for its advertising, having made a large number of commercials that aim to amuse viewers. The GEICO gecko is voiced by English actor Jake Wood.