Warren Buffett's Bershire Hathaway Inc. likes to keep its investing philosophy simple: Acquire undervalued companies with good economics and a strong existing management team. The Omaha-based investment company did just that on Dec. 25, purchasing 60% of manufacturing and services company Marmon Holdings Inc. for $4.5 billion from the Pritzker family of Chicago.
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Marmon has all the Buffet-like attributes. The company has demonstrated strong growth over the past couple of years, with annual revenue of $7 billion last year. The Chicago-manufacturing company's profit margin grew from 2002 to 2007 to 12.4% of revenue, from 4.9%. The company has grown to compete in a wide variety of manufacturing industries ranging highway technologies, primarily serving the heavy-duty highway transportation industry; distribution services for specialty pipe and tubing; flow products for the plumbing, heating, ventilation, air conditioning and refrigeration, or HVAC/R, construction and industrial markets; industrial products including metal fasteners, safety products and metal fabrication; construction services, providing the leasing and operation of mobile cranes primarily to the energy, mining and petrochemicals markets; water treatment equipment for residential, commercial and industrial applications; and retail services, providing store fixtures, food preparation equipment and related services.
With regards to management, Marmon has been in the steady hands of the Pritzker family since the 1950s. Tom Pritzker has been chairman since 2002, and Frank Ptak was appointed CEO in 2006. Simply put, Buffett told CNBC about Marmon that its "our kind of company. ... It's in some very basic businesses but good businesses.'' With Buffet's track record, he usually knows a good thing when he sees it. Berkshire Hathaway is set to generate its 17th annual gain in 20 years. The stock,
which traded at $2,950 on Dec. 31, 1987, has risen 25% in
2007, outpacing the 5% gain for the Standard & Poor's 500 Index, according to Bloomberg. — Gerald Magpily
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