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A new investigation into the decades when Warren Buffett earned his best returns
Discover how Warren Buffett’s earliest investments-from Greif Bros. to Disney-revealed the core strategies that built his fortune. Uncover actionable lessons from Buffett’s formative years and see how his unique approach can inspire smarter investing today.
Unlock the proven investment tactics that set Warren Buffett apart-keep reading to learn how you can apply these timeless strategies to your own portfolio and achieve lasting financial success.
Introduction: The scoop on Buffet’s formative investments.
Buffet’s Early Investments (2024) investigates some of Warren Buffet’s formative early investments, uncovering the unique insights that drove his decisions and made him his first millions. It provides a fascinating behind-the-scenes look at some of the most significant investments in business history.
When Warren Buffett revealed a $1 billion stake in Apple in 2016, the market reacted immediately. Despite struggling with a 14 percent decline that year, Apple’s stock surged 3.7 percent the very next day. What began as a modest position for Buffet’s Berkshire Hathaway eventually expanded to 887 million shares worth over $150 billion by 2022, becoming one of the most profitable investments in history.
This is the Warren Buffett Effect – when markets move dramatically because Buffett, the world’s most powerful and successful investor, has spoken with his wallet. Today, his investments create a self-fulfilling prophecy: when Buffett buys, others follow, and success becomes almost inevitable.
Yet the true investment lessons lie in what Buffett accomplished before his name alone could move markets. This summary uncovers the methodology behind five of Buffet’s earliest investments, both successful and unsuccessful, to show how the “Oracle from Omaha” mastered the game. Ready to learn investment strategies from the Buffet playbook? Then let’s get started.
1951: Greif Bros.
In the 1900s, Greif Bros. called itself “The largest cooperage factory in the world.” What’s cooperage, you ask? It’s the manufacturing of wooden barrels. And if you’ve never heard of cooperage before, that’s not surprising: in the twenty-first century, the market for wooden barrels isn’t enormous. But even in 1951, when Warren Buffet pitched his father’s investment firm Buffet-Falk & Co. on buying up Greif Bros. stock, cooperage was an industry in decline.
So what did the 21-year-old Buffett see in this seemingly unexciting company? He saw a classic net-net opportunity.
A “net-net” investment occurs when a company trades below net current asset value – meaning the company’s current liquid assets minus liabilities. This approach identifies companies selling for less than their liquidation value. Buffet would later call these “cigar butt investments.” A cigar butt in the gutter might only have one puff left, but that puff is free.
Greif Bros. fit this profile perfectly. The company had a net current asset value of $20.47 per share – representing what would remain if the business paid off all debts using just current assets. The company’s tangible book value – the theoretical amount if all physical assets were sold and debts paid – stood at $39.60 per share. The market significantly undervalued these assets. Greif Bros. shares were priced at $18.25 – representing a slight discount to net current assets and a 54 percent discount to tangible book value.
What made Greif Bros. particularly interesting was its asset composition. The company owned 239 manufacturing plants and 11 divisional offices. Much of its inventory was wood, likely to hold value over time. What’s more, in the 1940s, Greif Bros. had switched to LIFO accounting, or Last-In, First-Out accounting. This assumes that the most recently added inventory items are the first ones sold. This approach typically understates inventory value, meaning Greif’s true asset value was likely even higher than the already attractive book value suggested.
To Buffet, this investment offered substantial downside protection: thanks to its asset value the company would likely fetch more in liquidation than its market price. But there’s an interesting postscript: unlike many net-net investments, Greif Inc. didn’t go under. The company is now a leader in industrial packaging solutions, with a $3.4 billion market capitalization as of 2023. Buffet’s early identification of value in Greif. Bros foreshadowed his eventual instinct for finding and investing in companies with adaptable business models and durable competitive advantages.
1952: Philadelphia and Reading
In 1952, the Philadelphia and Reading Coal and Iron Company was a corporation on life support. The company began as a railroad in the 1800s but established a coal subsidiary in 1868. This vertical integration of mining and transportation worked well. Too well. In 1915, antitrust laws forced them apart. By 1922, the Coal and Iron Company was operating independently.
Challenges mounted from there. The company specialized in anthracite coal, which faced increasing competition from cheaper alternatives like oil and gas. Hit hard by their loss of market share and by the Great Depression, the company declared bankruptcy in 1937, reemerging after a restructure in 1945.
In 1952, Buffet began buying P&R shares at $19. When the price fell to $9, Buffet stayed bullish. By 1954, he’d invested $35,000 – his largest personal holding at the time.
What did Buffett see? While most investors focused on the concerning income statements showing declining sales, he examined the balance sheet more carefully. He identified significant inventory value. He also noted an off-balance sheet asset: culm banks. Culm is mining waste that can have value as a fuel source. Buffet estimated these were worth about $8 per share. By Buffet’s calculus, the shares were worth at least $17 – making $9 quite a bargain.
So far, so standard: another signature cigar butt investment.
But there was something else. Buffet’s mentor, Ben Graham, who now employed Buffet at his Graham-Newman fund, sat on P&R’s board after acquiring substantial stock. Buffett believed in Graham’s ability to guide the company.
After P&R reported a $7.3 million loss in 1955, Graham-Newman managed to gain greater control of the board, eventually securing five seats. They renamed it the P&R Corporation and implemented a new strategy: using cash from liquidated mining assets to acquire profitable businesses.
Their first major acquisition was Union Underwear, manufacturer of Fruit of the Loom products, for $15 million – representing 35 percent of P&R’s assets. Later acquisitions included Acme Boots and Lone Star Steel. Graham-Newman effectively organized P&R as a sophisticated holding company. This structure utilized the coal company’s tax-loss carryforwards to shield profits from new acquisitions from taxation, effectively transforming a dying coal business into a tax-efficient, diversified corporation.
The result? Shares that Buffett purchased for $9–19 eventually climbed above $65. More importantly, this experience shaped Buffett’s future approach: not just passive investing, but active involvement in business strategy.
1962: British Columbia Power
Traditional investment advice? Diversify, diversify, diversify. But Buffett isn’t a traditional investor. In 1962, he bet big, concentrating his investments on an enticing opportunity that emerged in British Columbia that year. The province’s government seized BC Power’s main asset, BC Electric Company. BC Power sued for better compensation. As the dispute dragged on, its stock price fell sharply.
Buffett spotted an opportunity and bought BC shares aggressively. He sensed the deal would close eventually and saw further potential upside if BC Power did manage to extract higher compensation from the government.
When evaluating this opportunity, Buffett considered several critical factors. He asked himself first how likely it was that fair compensation would be made and second that BC would liquidate. The government had already seized the assets, so it seemed unlikely they would reverse course. BC Power was only litigating for higher compensation and had already distributed $89.2 million to shareholders, signaling their commitment to liquidation –which would benefit Buffett by returning his capital quickly.
He considered the downside. It appeared minimal. At $38 Canadian, the stock was trading only 9.4 percent above its post-takeover announcement price and well below its 1961 high of $39 Canadian a share. As a utility company with stable demand, BC Power’s value would likely increase over time even if the deal fell through. Not only that, Buffet knew that other arbitrageurs would help establish a floor price for the shares, reducing the risk of a margin call – a demand from brokers for additional funds when a security’s value decreases.
Convinced by this analysis, Buffett bet big. In 1962, BC Power shares represented more than 11 percent of Buffet Partnership’s investments. His concentrated investment paid off. In 1963, a court determined that the government should have paid an additional $20 million Canadian beyond the original $171 million package. The government was ordered to pay the difference, after which BC Power proceeded with liquidation.
This workout investment – an investment in a company that is restructuring – allowed Buffett to generate returns uncorrelated with the general market. In 1962, while his general investments were down 1 percent, his workout investments, largely thanks to BC Power, gained an impressive 14.6 percent. No, it wasn’t a conventional investment – but its unconventionally good returns proved Buffet’s instincts correct.
1964: American Express
In 1958, American Express, until then known for Travelers Cheques, launched the world’s first plastic credit card. It was a great success. Explosive demand meant the company struggled with core operational demands. Carrying out collection and credit checks proved more complex than expected. But thanks to tighter workflows and stricter policies around payment, by 1962 they were in the black to the tune of an 11 percent rise in revenue annually. Things looked rosy.
Until the salad oil scandal.
The scandal erupted when the Allied Crude Vegetable Oil Company committed massive fraud. American Express’s subsidiary, American Express Field Warehousing Corporation, verified and certified that Allied had millions of dollars worth of salad oil in storage tanks. In reality, the tanks contained mostly water with just a thin layer of oil floating on top. Banks had loaned Allied millions based on warehouse receipts issued by American Express. When the fraud was discovered, American Express faced potential liability for these loans since they had certified the non-existent inventory.
Investors panicked, uncertain about American Express’s financial exposure. The company’s stock plummeted. What did Buffett do? He observed and investigated.
Initially, analysts feared American Express might owe up to $135 million in liabilities. As more facts emerged, estimates dropped to between $10 and $35 million – still substantial, but more manageable.
Buffett’s analysis went deeper than most. Rather than simply comparing these new liabilities to the balance sheet, he focused on American Express’s most valuable asset – one that didn’t appear in financial statements. This intangible asset was the public’s trust in the American Express name. While American Express offered various financial products, their real value was their reputation as a trusted “guard” for people’s money. The critical question wasn’t whether the liabilities would damage the balance sheet, but whether they’d undermined this essential public trust.
To find answers, Buffett conducted his own market research, visiting restaurants, hotels, bank tellers, and cardholders. What he discovered was revealing – most customers seemed unconcerned about the scandal. The numbers confirmed his observations: Travelers Cheque sales were up 28 percent that year, and credit card billings in December rose 44 percent year over year.
Convinced, Buffett initially purchased 70,000 shares at $40 each. He continued buying, and by 1964, he owned 5 percent of the company. All told, he made $15 million from this investment – representing a third of Buffett Partnership’s overall gain between 1964 and 1967.
1966: Walt Disney
In 1966, Warren Buffet made a supercalifraglisticexpialadocious investment decision: he bought a 5 percent stake in the Walt Disney company. The company was riding high after the global success of Mary Poppins, released in 1965. Yet its $80 million valuation was laughably low. Why?
This investment, which would become one of Buffett’s most instructive case studies, perfectly demonstrated his ability to recognize intrinsic value when others couldn’t see it.
Disney had just enjoyed tremendous success with the release of Mary Poppins, yet its stock was trading at remarkably low earnings multiples. Most investors viewed movie studios as unpredictable investments – one hit film could be followed by several flops. Then there was the problem of the man himself: Walt Disney was still at the helm of his eponymous company. And while he was an acknowledged creative genius he also had a reputation for prioritizing artistic vision over shareholder returns, creating perceived risk.
But Buffett looked deeper than other, more cautious prospective investors. Here’s what he saw: Disney had built an exceptional brand in family entertainment, pioneered the monetization of intellectual property through merchandise, and diversified beyond films with the opening of Disneyland in 1955.
Before investing, Buffett did what he often did – hands-on research. He went to Loew’s Cinema in New York and watched Mary Poppins. His assessment? It wasn’t just a one-time success but an oil well that would never run dry. Every year, new generations of children would discover its magic.
Buffett then visited Walt Disney in Burbank, receiving a personal tour of the studio. When he learned the upcoming Pirates of the Caribbean attraction alone was valued at $17 million, his investment thesis crystallized. As Buffett later explained, he was looking at a company selling at a cost only “five times the rides!”
His quick calculation suggested the entire $80 million market capitalization barely covered Disneyland’s worth – meaning investors were getting all of Disney’s characters, films, and other assets essentially for free.
Buffett purchased approximately 5 percent of Walt Disney Productions for $4 million. The investment was practically perfect in every way – except one. Buffet sold his position just a year later, a decision he would regret, especially given that the stock he bought in 1966 for $0.31 a share and sold in 1967 for $0.48 a share was worth $66 a share by 1995. But what’s more remarkable is the fact that such an opportunity existed at all. One of the world’s strongest brands was available at a dramatic discount to anyone willing to look beyond short-term market sentiment.
Conclusion
The main takeaway of this summary to Buffet’s Early Investments by Brett Gardner is that by concentrating his investments, taking an activist role in company management, and conducting hands-on research, Warren Buffet developed the perceptive investment style that made him the world’s most successful investor. Looking beyond the balance sheet and bucking market expectations allowed Buffet to make some of the most profitable investments of a very profitable career.