Wednesday, March 25, 2015

Warren Buffett believes in bad food

Warren Buffett knows you are weak. Even if you hit the gym regularly and demonstrate Buffett- esque discipline with your investments, sooner or later you’re going gulp down a sugary soda and put your money into mac-and- cheese with a bright orange hue.

Buffett believes in bad food, both as a consumer and an investor. While there might be no long-term reward in risky eating, there's relatively little risk in buying best-of-breed junk food holdings—at least if Berkshire Hathaway returns are any measure. Omaha has made a mint on artery-based arbitrage.

Let’s take a stroll down Buffett’s bad-for-you buffet:

* 1940: Buffett has been a Coca-Cola investor since he sold the stuff door-to-door in his childhood. At the end of 2014, Berkshire owned 9.2 percent of Coke shares

* 1972: Berkshire Hathaway buys See’s Candies for $25 million

* 1998: Dairy Queen, which had 5,790 outlets at the time, becomes a Berkshire Hathaway holding for $585 million

* 2008: Berkshire Hathaway put up $6.5 billion to help Mars purchase of chewing-gum maker Wm. Wrigley Jr.

* 2013: Buffett pours $12.25 billion into a deal to take ketchup- and-packaged-food giant HJ Heinz private under 3G Capital, a Brazil-based private-equity firm.

* 2014: Berkshire Hathaway provides $3 billion financing for Burger King’s purchase of the Tim Hortons donut empire. It is getting a 9 percent annual return.

Today, of course, Buffett is back at it again, working with 3G to bring together Kraft Foods Group and Heinz. The deal creates the third-largest food and beverage company in North America—a veritable mountain of ketchup, cold cuts, Kool-Aid, and lots and lots of cheese.

While cutting these deals, Buffet was putting his mouth where his money was. His diet consists of Cheetos, licorice and—most often—Utz potato chips as an important source of vegetables. The even investor is known to drink Coke at breakfast, a meal for which the main even is occasionally ice cream.

When asked about his diet, Buffett has said he aims to eat like a 6-year-old because that’s the age at which mortality is least likely. In terms of investing, his junk-food strategy is even more straightforward: People like to indulge. “No business has ever failed with happy customers,” Buffett said at Coke’s annual meeting in 2013.

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