章節 768: Chapter 768: Buffett's Shock
Tiger Fund, Bridgewater Fund, and Polaris Capital are all in action. Xia Yu is not idle, but has instead plunged headlong into the New York Stock Exchange, continuing to study stocks in the hope of discovering one or even several future super golden stocks.
'GEICO, under the leadership of CEO Brian, saw a 5% year-on-year decline in insurance claim costs in the first quarter, and is expected to emerge from the doldrums...'
In the New York Stock Exchange, Xia Yu sat in his chair, casually flipping through today's copy of the Wall Street Journal. In a corner of the back page, a news story caught his attention.
'GEICO? It's this company? Has it already started to emerge from the doldrums?'
Xia Yu's eyes narrowed as he read on.
After a long while, he closed his eyes and pondered, thinking about everything about GEICO.
Then he opened his eyes and quickly got up, searching the New York Stock Exchange for any information about GEICO, especially shareholder information.
The New York Stock Exchange is the best place to gather information. The New York Stock Exchange itself will keep information about all listed companies and make it public.
So it didn't take long for Xia Yu to gather information about GEICO. Looking at the shareholder information, a flash of light passed through his eyes, and he thought to himself, 'Just as I expected.'
He saw that on the list of major shareholders, the second largest shareholder was a company with a formidable reputation in later generations: Berkshire Hathaway.
And the shareholding ratio was 27.3%!
Immediately afterwards, he collected information on Berkshire Hathaway again in an attempt to make a more accurate judgment.
The next morning, he had collected information on both companies, and he sat in his office, frowning and thinking.
Berkshire Hathaway is needless to say a company run by Warren Buffett, with a market value of over 500 billion US dollars in later generations, ranking among the top five in the world, a proper financial empire.
However, today, Berkshire Hathaway has not changed, and is merely a company with a market value of 270 million US dollars.
Last year, Berkshire Hathaway's operating profit was only 34 million US dollars.
However, this profit was the highest in Berkshire Hathaway's history.
It was precisely because of last year's explosive profit that Berkshire Hathaway's market value increased by 110% throughout the year.
In other words, at the beginning of last year, Berkshire Hathaway's market value was just a little over 100 million US dollars.
However, even the current market value of 2.7 billion US dollars is quite low. Think about its future market value of over 500 billion US dollars, the difference is nearly 2,000 times!
More importantly, Berkshire Hathaway's shares have never been split until now, and the potential value of each share is now super amazing.
Thinking about Berkshire Hathaway's share price of more than 300,000 US dollars per share in the future, compared to the current share price of a few hundred US dollars per share, Xia Yu can't help but feel a lot of emotions.
Of course, Xia Yu, who has memories of the future, knows very well that Berkshire Hathaway's high market value is due to Warren Buffett's superb investment, and the investment and acquisition of GEICO was a key step in Berkshire Hathaway's transformation.
Berkshire Hathaway in the future is a giant in the insurance industry in the United States and even the world, and the foundation of all this comes from GEICO.
Speaking of which, it is impossible not to mention the glorious history of GEICO.
The full name of this company is the Government Employees Insurance Company, which was founded in the 1940s and mainly engaged in automobile insurance for government employees. Under the brilliant management of Graham, the Government Employees Insurance Company developed rapidly and became the fifth largest automobile insurance company in the United States in just over ten years, with a market value of over one billion US dollars at its peak!
However, in 1976, Graham had already left GEICO and no longer held the position of chairman. He passed away that year. The management of GEICO made a series of mistakes in assessing the cost of insurance claims, which caused the company's claim costs to increase significantly, and GEICO fell into losses and was on the verge of bankruptcy.
At this time, Warren Buffett took action and began to intervene by buying GEICO shares on the market.
Although Berkshire Hathaway was buying GEICO shares on the market, the company was still a big fish even after a few die. GEICO had after all been one of the top car insurance companies in the United States. Even though it had suddenly run into management problems and was on the verge of bankruptcy, its glorious past and profound heritage could not be hidden.
In 1976, Berkshire Hathaway had a market value of less than $100 million, and its investable capital was even less. How could it possibly swallow GEICO, which was worth several hundred million dollars?
So it could only nibble away, like an ant eating meat, and over the past four years it has gradually increased its stake to 27.3%!
And it is still increasing its stake.
Warren Buffett's interest in GEICO is inseparable from Graham.
Warren Buffett was a student of Graham, who was a well-known American securities analyst. When Buffett was a student, he fervently admired Graham and invested in all the stocks held by Graham's company.
In the 1950s, Warren Buffett visited Graham at GEICO and had a detailed discussion with him for four hours. In the end, he bought GEICO stock for $10,000 and sold it all the next year after making a profit of 50%.
Of course, Warren Buffett was able to visit Graham because of his congressman father, but this is rarely mentioned in Buffett's autobiography or reported by the media. Most people just know to drink the chicken soup, so they don't know the necessary factors for Buffett's success.
While other children were just playing games, Buffett was walking around Wall Street with his father, receiving an elite education and starting far higher than the average person.
That said, now that GEICO's rising star, Brian, has taken office, GEICO's recovery is a foregone conclusion.
In later generations, GEICO became the second largest auto insurance company in the United States, and the mainstay of Berkshire Hathaway.
Berkshire Hathaway currently only holds a 27.3% stake, which is still relatively low, but it is definitely increasing its holdings, and by 1995, it will hold a 51% stake.
It then spent 2.3 billion US dollars to acquire the remaining 49% of the shares and complete the privatisation.
Such an insurance company with huge potential tempted Xia Yu.
Of course, Berkshire Hathaway also tempted him.
If he bought Berkshire Hathaway's shares now and became a major shareholder, then he could fully enjoy the benefits brought about by the acquisition of GEICO.
But after careful consideration, Xia Yu decided to snatch GEICO.
It was rare to come across an insurance company that had not yet risen to prominence and had apparently been abandoned by large financial groups.
He needed a strong financial pillar in the United States, and banks needed it, securities companies needed it, and of course insurance companies could not do without it.
As for whether Berkshire Hathaway would fail to rise without GEICO,
Xia Yu was not worried at all. The key to Berkshire Hathaway's rise was Warren Buffett's ability. As long as he was still in the position of chairman, Berkshire Hathaway would definitely rise.
It's just that the path to success will definitely be different from the previous one, and the height of success will also be different.
After making up his mind, Xia Yu took immediate action, assigning some people to form two acquisition teams and began to absorb the stocks of Berkshire Hathaway and GEICO.
At the same time, he also asked Peter Lynch to take some time off to go to Merrill Lynch.
The reason for approaching Merrill Lynch was that Merrill Lynch held 12% of GEICO's equity, but had lowered GEICO's rating, obviously not optimistic about it.
So as long as the price is right, Merrill Lynch will be more than happy to sell the 12% stake it holds to Polaris Capital.
Merrill Lynch is a giant on Wall Street, and the success rate of having it take over and privatise GEICO is very high.
Considering the business of commissioned acquisitions, Merrill Lynch readily sold its stake to Polaris Capital for a mere 10% premium!
GEICO is an equity that Warren Buffett has been eyeing, and naturally attaches great importance to it.
When Merrill Lynch came knocking on the door to buy it, he was suddenly taken aback, and a strong sense of urgency immediately arose in his heart.
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