Berkshire Before Buffett Posted by Bryan Tayl

Berkshire Before Buffett

Posted by Bryan Taylor in Stock Histories with no response yet
Everyone is aware of the incredible returns that Berkshire Hathaway has provided shareholders during the past fifty years that Warren Buffet has run the company. In the late 1960s, when Warren Buffett became CEO of Berkshire Hathaway, shares in the company were trading at under $20. Today, shares trade around $200,000. During the same period of time, the S&P 500 Total Return Index went from around 38 to 3800. While the S&P 500 increased 100-fold, Berkshire Hathaway increased 10,000-fold. That is what I call value added.

But how well did Berkshire Hathaway perform before Warren Buffett took over the company? Had the company performed well even before Warren Buffett took over, or did Buffett change the company’s performance dramatically?

Berkshire Fine Spinning Associates is Formed

Berkshire Fine Spinning Associates Inc. incorporated under Massachusetts laws in 1929 as a consolidation of Berkshire Cotton Manufacturing Co., Valley Falls Co., Coventry Co., the Greylock Mills, and Fort Dummer Mills. The company changed its name to Berkshire Hathaway in 1955 when it acquired Hathaway Manufacturing Co.

Berkshire Fine Spinning Associates Inc. manufactured fine grades of cotton textiles and specialized in fine lawns, batistes, nainsooks, organdies, dimities, handkerchief cloths, broadcloths, oxfords, sateens, rayon and silk mixtures. Plants were located in New Bedford, Massachusetts.

Berkshire offered 33,000 shares of common stock in 1929 at $40 per share as well as 4,860 shares of 7% Preferred stock, also at $40 per share. Unfortunately, the shares were offered in the middle of the 1929 bull market, and the share price collapsed soon after. In November 1929, the ask price for Berkshire stock was still at $40, but in November of 1931, shares sank to $0.50. Sales for the company declined and Berkshire ran losses until 1936.

As late as 1940, shares traded as low as $3, but profits and the share price picked up with the war.