Quality Without Compromise - Berkshire's Investment in See's Candy

Part 1:

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William Ramsey, an executive at Blue Chip Stamps, stood in the office of Robert Flaherty as they both awaited a call. Moments earlier, Flaherty had attempted to persuade Warren Buffett, majority owner of Blue Chip Stamps, to consider purchasing See’s Candy, a popular West Coast candy maker. Buffett turned them down—up until then, he was used to buying boring businesses on the cheap: banks, textile mills and insurance companies. Ramsey however, thought See’s was a great buy, and desperately tried to get Buffett back on the phone. Their secretary finally got hold of Buffett at his home in Omaha. He had reviewed the numbers, and liked what he saw.

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Part 2:

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See’s Candies was a fantastic business. Buffett and Munger couldn’t have asked for much better. With Chuck Huggins, the See’s brand name, and the superior economics of the candy industry, they got the whole package for $25 million. But ultimately, the success of any investment comes down to the price paid relative to the value received. Was paying 12.5 times after-tax earnings justifiable?