No. of Recommendations: 13
This is a critically important on-topic matter. Dairy Queen is a wholly owned Berkshire subsidiary, and we need fellow shareholders to step up to the plate and honor this great business by partaking in one of the specials DQ is offering starting today.
TODAY through April 6 you can get a small Blizzard for just 85 cents with any purchase of $1 or more. And this 85th DQ birthday offer is not just for fellow Berkshire cheapskates--it's for everyone!
THEN make your plans for the NEW summer Blizzard menus starting next Monday:
**Mixing Bowl Mashup: Brownie batter & chocolate chip cookie Dough
**Dipped Strawberry Cheesecake
**S'mores
**Confetti Cake
**Cotton Candy
Does Warren pick great companies? Please put aside your caloric concerns for now. Do it for your company. Celebrate this milestone!
No. of Recommendations: 26
Did somebody say Dairy Queen? I have a soft spot for Dairy Queen as that was one of my tickets into becoming a Berkshire Hathaway shareholder. The first ticket was FlightSafety, when Buffett acquired that company one year earlier, and I exchanged my shares of FlightSafety for Berkshire shares.
Back in December 1997, I wrote a blurb: Why Warren Buffett is Scooping Up International Dairy Queen:
Warren Buffett's fondness for sweets is evident by his daily Cherry Coke cravings and through his investments in Coca-Cola and See's Candies. Tootsie Roll and International Dairy Queen might also satisfy Buffett's sweet investment tooth. Both companies boast profitable operations, strong financial positions and consistent long-term growth records. Best of all, Tootsie Roll and Dairy Queen currently sell at tempting valuation levels. Management owns significant amounts of the voting shares at each firm. Dairy Queen's return on shareholders' equity has exceeded 20% over the last 10 years. With substantial cash flows, Dairy Queen consistently buys back shares-a trait Mr. Buffett views positively.
Indeed, the Oracle of Omaha operating Berkshire Hathaway did view International Dairy Queen positively! This past October, Berkshire Hathaway announced plans to acquire International Dairy Queen in a $585 million deal. Warren Buffett noted, "Dairy Queen is a business that I like run by an outstanding management team." John Mooty, the chairman of Dairy Queen and a principal shareholder, responded, "Our family will vote our entire 35% of the voting shares of Dairy Queen in favor of the merger and will elect to receive Berkshire common stock for all the Dairy Queen shares owned by us."
Shareholders may elect to receive either $27 in cash or $26 in class A or class B Berkshire shares for each share of Dairy Queen. I plan to exchange all my Dairy Queen shares for Berkshire Class B stock. I'll thus retain my interest in International Dairy Queen and at the same time benefit further from Mr. Buffett's renowned investment expertise by adding to my existing Berkshire Hathaway holdings.
Out of thousands of companies, why is Buffett scooping up International Dairy Queen? After a director and significant shareholder died, Dairy Queen approached Berkshire Hathaway about buying part of the estate's shares. I'm sure it didn't take Mr. Buffett long to agree to buy the whole company instead. The simple reason is that Dairy Queen perfectly met Berkshire Hathaway's acquisition criteria:
(1) Large purchases (at least $25 million of before tax-earnings),
(2) Demonstrated consistent earning power (future projections are of no interest to us, nor are "turnaround situations,"
(3) Businesses earning good returns on equity while employing little or no debt,
(4) Management in place (we can't supply it),
(5) Simple businesses (if there's lots of technology, we won't understand it),
(6) An offering price (we don't want to waste our time or that of the seller by talking, even preliminarily, about a transaction when price is unknown).
With 24 consecutive years of record earnings, minimal debt and earning returns on equity over 20%, Dairy Queen easily met all the criteria on the checklist. Not surprisingly, Buffett scooped up the company at a reasonable price. Just as in the case of FlightSafety, Wall Street is grumbling that Buffett is getting a bargain. Of course, that is Buffett's trademark! Instead of grumbling, shareholders should welcome the opportunity to exchange their Dairy Queen shares for Berkshire Hathaway shares and hope Warren Buffett continues to identify such sweet bargains in the future.
Warren Buffett's investment success is legendary. Part of this success comes from identifying outstanding companies using his relatively commonsense acquisition criteria outlined above. Long-term investors would be wise to adopt Buffett's acquisition criteria as part of their investment criteria. By carefully investing in reasonably-valued companies with consistent earnings power, little debt and good returns on equity, you, too, should enjoy profitable investment returns. Even if Buffett doesn't come along and scoop up firms like FlightSafety and Dairy Queen from your portfolio, you will comfortably know that you are following a multibillionaire's recipe for investment success!
No. of Recommendations: 4
I remember the DQ purchase when it happened--and celebrated with a large cherry dip cone :). It just seemed right out of the See's Coke playbook. And it's been yet another low risk/high reward Home Run for Buffett.
Most of DQs locations are franchised so this is a fairly capital light business--Berkshire Doesn't have to invest heavily in RE, Equipment, or store ops. Berkshire collects franchise fees and ROYALTIES--a beautiful high margin, recurring revenue stream. I think of this every time I enjoy a blizzard or cone lol.
Dairy Queen's incredible brand strength powers this recuring revenue. It's a poster child for Warren's love affair with powerful valued franchises--the gift that keeps on giving.
DQ, like See's, has strong pricing power. When $3 small cones go to $3.49 there's barely a blip in demand loss.
Warren bought the business 28 years ago not just for its obvious franchise power but because he loves the product himself-a two-fer.
Much like Coke.
Dairy Queen is a quintessential Warren Buffett holding. It's not so massive that it moves the needle like a Coke--but it's a pretty darn special 85-year-old Berkshire family member... I hope the guy 9 years older is celebrating with at least an 85 cent Blizzard today :)
No. of Recommendations: 3
Right on, will do! We frequent DQ with the kids and occasionally otherwise-the Blizzards are superb!
Classic Warren to request Ted Koppel on “Nightline” do this insightful, entertaining & spirited interview inside of a busy Omaha DQ in 1999. Good move by Ted to have already been a BRK owner for many years. Worth a watch! Link:
https://www.youtube.com/watch?v=jPJXQ3FqPLk&pp=ygU...
No. of Recommendations: 6
TODAY through April 6 you can get a small Blizzard for just 85 cents with any purchase of $1 or more. And this 85th DQ birthday offer is not just for fellow Berkshire cheapskates--it's for everyone!
Complaint: I’m just me. Mrs. Goofy is forever on a diet and won’t go there. Now I love a Blizzard, I get the Chocolate Brownie Extreme all the time - but there’s nothing else there that I’m going to buy for $1.
I hate it when a company makes it hard to execute a promotion. Best Buy had a point system so hard to keep track of and hard to redeem (basically you had to pre-decide when you were at home, log in, redeem the points and get a certificate, then go to the store to find out … oops, out of stock. Bah.) A local restaurant gives a “buy one get another 1/2 off” but only if you return within a week. Really?
The harder you make it for someone to execute, the lower your participation will be. Maybe there’s a good reason for this “+$1” attachment, but it means I can’t/won’t play.
Nice idea. Leaves me out in the cold, pardon the expression.
